The Urals oil price for northwestern Europe fell to $18.64 a barrel ($5.25 lower than it was), Argus Media reported on March 19. The discount for Urals reached $4.18 a barrel under the Brent benchmark. This is the lowest price of Urals since 2002.
The Urals price is falling amid the decision of Saudi Aramco to provide unprecedented discounts for its oil and increase output to the market. Saudi Arabia sells its Arab Light and Arab Medium oil with a discount of $5-100 a barrel under the Urals. Experts call the Saudi actions a direct attack on Russia’s ability to sell oil on the European market.
The $42.40 Urals price is the price at which Russia’s budget is balanced, the Russian Finance Ministry said on March 9. Despite this, Russia’s National Wealth Fund had as of March 1 liquid assets worth US$150.1 billion, or 9.2 percent of Russia’s gross domestic product (GDP). Therefore, the country should be able to compesate the decrease of oil sales profit for some period of time.
However, if oil prices fall and furher, and the economic meltdown around the world continue, Russia could face significant economic damage. The situation will be especially complicated because of the ongoing cosntitutional reform in the country that followed a series of unpopular economic decisions that led to an increase of social tensions in the country. The entire system of ‘energy revenues’, which has been among the cornerstones of the government’s economic policy, is shrinking.
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