The high price discount of the Urals to Brent negatively affects the revenues and profits of oil companies – CBR

MOSCOW, May 26 (Reuters) – Russia’s corporate sector continues to come under pressure from sanctions, in particular the steep sell-off of Urals crude oil against Brent crude oil is having a negative impact on oil companies’ revenues and profits, the CBR said in a financial stability review released on Friday .

“The direct and indirect pressure of sanctions on the Russian oil sector has resulted in significant changes not only in the geography of supplies, but also in the selling price of Russian oil,” the review reads.

Starting from March 2022, Urals oil, according to the Ministry of Finance, is sold at a significant discount to Brent, on average over the last 12 months amounting to about USD 28 per barrel.

In the first quarter of 2023, the discount amounted to approximately 40%, and the low selling prices of Russian oil in the context of logistic, commercial and financial restrictions for Russian oil companies pose a risk of reducing their revenues and negatively affect the profitability of their operations in general, the regulator writes.

At the same time, from the second quarter of 2023, the size of the Urals to Brent discount has been decreasing against the background of trade flows.

The Ministry of Finance has set the maximum discount for tax purposes, which will encourage companies to sell products at higher prices, which will affect the size of the discount in the future, the National Bank of Poland believes.

In order to stabilize tax revenues from MET and AIT to the federal budget, the maximum discounts for Urals to Brent oil were set at USD 34 from April 1, 2023, and then lowered to USD 25 until July this year.

If the discount is less than the set level, taxes are applied based on the actual price level. (Elena’s Factory)