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Russia sees oil & gas income fall by almost $40 billion

Russia sees oil & gas income fall by almost $40 billion

Moscow, March 19 - Neftegaz.RU. Russia’s revenues from oil & gas will be $39.5 billion (RUB 3 trillion) lower than planned, due to the tumbling oil prices, Russian Finance Minister Anton Siluanov said on March 18, adding that Russia’s budget will be in deficit this year, Oilprice reported.

The coronavirus pandemic and the lower economic activity, coupled with oil prices half the level before Russia and Saudi Arabia broke up the OPEC+ production cut deal 2 weeks ago, will weigh on Russia’s budget this year, which will tip into deficit.

Russia’s economy is not going as well as one would have hoped, the finance minister admitted today, saying that the oil price factor alone is set to reduce the country’s budget income by nearly $39.5 billion compared to earlier estimates. In case of budget deficit, Russia will use reserves from the National Wealth Fund (NWF), Siluanov said.

According to analysts at Gazprombank, cited by Reuters, the fund has enough reserves to compensate for lower budget revenues due to low oil prices for more than 5 years.

Last week, a day after oil prices collapsed in the worst drop in nearly 3 decades - courtesy of the renewed Saudi-Russia rivalry on the oil market – Russia’s Finance Ministry said that Moscow had enough resources to cover budget shortfalls amid oil prices at $25-30 a barrel for 6 to 10  years.  

The price of the Russian export grade Urals dropped far below $42.40 a barrel as oil prices tumbled by 30 % after Saudi Arabia launched an all-out price war with Russia following the collapse of the OPEC+ group.

The $42.40 Urals price is the price at which Russia’s budget is balanced, the Russian Finance Ministry said last week, noting that the country’s NWF had as of March 1 liquid assets worth $150.1 billion, or 9.2 % of Russia’s gross domestic product (GDP).

Lower oil prices are likely to persist for some time, considering the huge demand destruction in the coronavirus outbreak and the coming flood of extra supply on the already oversupplied market as both Russia and Saudi Arabia pledge to boost supply in the new feud between the former allies.