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Russia’s Urals exports face renewed losses as Brent price sinks

Russian oil exporters face renewed losses from exports of Urals crude because of a deep fall in global oil prices that on Wednesday saw international benchmark Brent crude sink to its lowest since 1999.

The negative prices add to concerns about the impact of the novel coronavirus on Russia’s economy, which relies on oil and gas revenues for nearly half of its budget.

Export profits for Urals crude oil shipments from the Baltic sea port of Primorsk and the Black Sea’s Novorossiisk recorded losses for the first time in 20 years at the end of March and the start of this month.

Reuters calculations showed they turned negative again on Wednesday.

Russia’s budget and its tax regime, which calculates export duty based on oil prices for the month previous to loading, is designed to protect oil companies from any sharp falls in the global price.

But this year, the tax falls have been unable to keep up with a rapid decline in the price of Brent.

On Wednesday, Brent crude touched $15.98 a barrel, its lowest since June 1999. It later rallied, but was still only around a third of its December level.

Russia’s Urals crude oil trades at discount to dated Brent.

This week, Urals discounts to the European benchmark recovered in northwest Europe to minus $2.20-2.30 a barrel from minus $4.60 a barrel earlier in April.

Netbacks, or the profits from bringing a unit of oil to the market, are calculated on the basis of Urals spot assessments on the basis of CIF northwest Europe (cost and freight inclusive) minus Russia’s export duty for the month of delivery and minus export and transport costs.

According to Reuters calculations, export netbacks for Urals crude exported via Primorsk fell to minus 4399 roubles per tonne (minus $8.17 per barrel) and minus 3503 roubles per tonne (minus $6.51 per barrel) via the Black Sea port of Novorossiisk.

The calculations are based on April export duty of $52 per tonne and the dated Brent oil price as of April 21. BFO-E

Losses from Urals oil exports could become less painful in May, as the oil export duty will fall to $6.8 per tonne. That would make netbacks via Primorsk and Novorossiisk around zero, Reuters calculations show.
Source: Reuters (additional reporting by Olga Yagova; editing by Barbara Lewis)

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