For the budget deficit to reach the planned 3.8 trillion rubles, the average annual export price of Russian Urals crude oil must be $59 per barrel – the budget is based on this figure. For budget revenues to equal expenditures, $97 per barrel is required, according to Alfa Bank analysts.
In January, the average Urals price was $41, and the Ministry of Economic Development hasn't yet released the results for February. Meanwhile, the price of benchmark Brent crude spent most of the month in the $60-70 range. Due to sanctions, discounts on Russian oil jumped at the end of last year and have remained steady since: in February, they were $27-28.
The oil rally had little impact on Urals. On March 2, it was worth $46.4, notes Andrey Melashchenko, chief economist at Renaissance Capital. These Urals prices "imply that the discount further widened in early March," he notes.
In addition to the huge discounts Russia is forced to offer oil buyers, budget revenues are being squeezed by the strong ruble. The budget was drawn up based on an average annual exchange rate of 92.2 rubles per dollar, but the dollar is currently below 80 rubles. As a result, the ruble price per barrel, which generates budget oil and gas revenues, was less than 3,500 rubles in February—a third lower than the planned average of 5,440 rubles for the year. The preliminary estimated ruble tax price of Urals on March 2 was 3,582 rubles (Urals: $46.4 per barrel; the dollar exchange rate: 77.3 rubles), estimates Melashchenko.
This is approximately 7% higher than the price of Russian oil on Friday. The rise in Urals prices is reducing the shortfall in oil and gas revenues: Melashchenko estimates that offsetting sales of foreign currency and gold from the National Welfare Fund will decrease from 227 billion rubles in February to approximately 150 billion in March. However, this does not fundamentally change the situation with the Russian budget.
Experts are in no rush to revise their average annual oil price forecasts. BCS expects prices to stabilize and maintains its Brent price forecast for 2026 at $63 per barrel, writes analyst Kirill Bakhtin. Meanwhile, ruble prices remain extremely low, he notes: "The problem remains the same: the high discount that has persisted since the end of last year and the strong exchange rate of the national currency."
Russian authorities are also under no illusions about the long-term nature of rising global oil prices. Kirill Tremasov, an advisor to the Central Bank chairman, urged people to ignore short-term price fluctuations and focus on the long-term balanced oil price forecast. "Supply disruptions... will be temporary in any case," he asserted.
Due to oil prices being significantly lower than budgeted levels, the Ministry of Finance is urgently preparing changes to the budget rule to salvage the remaining balance of the National Welfare Fund. The so-called cutoff price will be lowered, which will automatically reduce the budget's base oil and gas revenues. This will reduce foreign currency sales from the National Welfare Fund and weaken the ruble. If the cutoff price is lowered to $50 per barrel, this could add 2-3 rubles to the average annual dollar exchange rate, which would benefit the budget, according to Alexander Potavin, a leading analyst at Finam.
This is much less than the budget requires. At current Urals prices, the dollar would need to appreciate to 117.5 rubles for the budget to be balanced, according to Reuters calculations.
In January, the average Urals price was $41, and the Ministry of Economic Development hasn't yet released the results for February. Meanwhile, the price of benchmark Brent crude spent most of the month in the $60-70 range. Due to sanctions, discounts on Russian oil jumped at the end of last year and have remained steady since: in February, they were $27-28.
The oil rally had little impact on Urals. On March 2, it was worth $46.4, notes Andrey Melashchenko, chief economist at Renaissance Capital. These Urals prices "imply that the discount further widened in early March," he notes.
In addition to the huge discounts Russia is forced to offer oil buyers, budget revenues are being squeezed by the strong ruble. The budget was drawn up based on an average annual exchange rate of 92.2 rubles per dollar, but the dollar is currently below 80 rubles. As a result, the ruble price per barrel, which generates budget oil and gas revenues, was less than 3,500 rubles in February—a third lower than the planned average of 5,440 rubles for the year. The preliminary estimated ruble tax price of Urals on March 2 was 3,582 rubles (Urals: $46.4 per barrel; the dollar exchange rate: 77.3 rubles), estimates Melashchenko.
This is approximately 7% higher than the price of Russian oil on Friday. The rise in Urals prices is reducing the shortfall in oil and gas revenues: Melashchenko estimates that offsetting sales of foreign currency and gold from the National Welfare Fund will decrease from 227 billion rubles in February to approximately 150 billion in March. However, this does not fundamentally change the situation with the Russian budget.
Experts are in no rush to revise their average annual oil price forecasts. BCS expects prices to stabilize and maintains its Brent price forecast for 2026 at $63 per barrel, writes analyst Kirill Bakhtin. Meanwhile, ruble prices remain extremely low, he notes: "The problem remains the same: the high discount that has persisted since the end of last year and the strong exchange rate of the national currency."
Russian authorities are also under no illusions about the long-term nature of rising global oil prices. Kirill Tremasov, an advisor to the Central Bank chairman, urged people to ignore short-term price fluctuations and focus on the long-term balanced oil price forecast. "Supply disruptions... will be temporary in any case," he asserted.
Due to oil prices being significantly lower than budgeted levels, the Ministry of Finance is urgently preparing changes to the budget rule to salvage the remaining balance of the National Welfare Fund. The so-called cutoff price will be lowered, which will automatically reduce the budget's base oil and gas revenues. This will reduce foreign currency sales from the National Welfare Fund and weaken the ruble. If the cutoff price is lowered to $50 per barrel, this could add 2-3 rubles to the average annual dollar exchange rate, which would benefit the budget, according to Alexander Potavin, a leading analyst at Finam.
This is much less than the budget requires. At current Urals prices, the dollar would need to appreciate to 117.5 rubles for the budget to be balanced, according to Reuters calculations.
