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Russian President Vladimir Putin has signed into law amendments in the tax code in the energy sector which will narrow the discount of Russia’s flagship Urals crude to Brent to $20 per barrel from September from a $25 discount now.
The amendments in the tax code will also halve the subsidies to Russian refineries as of September 2023 to the end of 2026.
The halved subsidies to refiners will allow Russia’s budget to save $326 million (30 billion Russian rubles) in expenses per month, according to Finance Minister Anton Siluanov.
The average price of Urals was $64.37 per barrel in July, down from $78.41 in July 2022, according to data released by the Russian Finance Ministry on Tuesday.
The average Urals price last month was above the $60 per barrel price cap set by the G7 and EU if Russian crude shipments to third countries outside the EU are to use Western insurance and financing.
Between January and July 2023, the price of Urals averaged $53.94 per barrel, down from $83.27 for the same period last year, the Russian finance ministry data showed.
Earlier this month, the price of Urals, which had been trading consistently below the price cap, climbed above $60 per barrel for the first time, which could pose problems for cautious buyers, including India.
In June, oil and gas revenues for the Russian budget slumped to $5.8 billion (528.6 billion Russian rubles), down by 26.4% from the same month last year, finance ministry data showed in early July. Compared to May 2023, oil and gas budget revenues for Russia also dropped in June, by 7.4%.
The higher benchmark oil prices in July and, as a result, the higher price of Urals as well as the ESPO grade, could mean higher budget revenues for Russia in July compared to June.
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com