Russia Starts Trading Oil At A Loss

All because of record discounts for China and India.

Oil production at some Russian oil companies has become unprofitable amid significant discounts they give to buyers in India and China. This is reported by Reuters with reference to analysts and sources in the industry.

According to the Argus agency, last week the price of the Russian Urals grade in the Baltic and Black Sea ports fell to 33-34 dollars per barrel - the lowest level since the pandemic. At the same time, the discount to Brent reached 27 dollars per barrel. Some batches of oil for Chinese refineries were sold at a discount of up to $35 per barrel, in fact at a price that was half the market price.

As a result, the oil industry has come close to the edge of profitability, and a number of projects have already become unprofitable. This is due, among other things, to difficult production conditions, says BCS analyst Kirill Bakhtin.

The oilfields, which are subject to a preferential rate of mineral extraction tax (MET) - one of the key sources of oil and gas budget revenues - continue to operate at a profit.

Reuters estimates that about 20 percent of oil producers pay zero MET and keep trading profits at about $20 per barrel even at current Urals prices. Another 30 percent or so of producers use reduced tax rates and also remain on the plus side.

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