Russia’s oil exporting profitability has dropped to its lowest point in two years. This decline is reflected in the netback price, which represents the revenue from oil sales after deducting transportation and other costs. For deliveries from Western Siberia to the Baltic Sea port of Primorsk, the netback reached its lowest level since June 2023, largely due to falling global oil prices.
The decrease in profitability raises concerns for the Russian government as the country faces high inflation and slower economic growth, conditions worsened by persistently low oil prices. Oil exports are crucial for Russia, serving as a significant source of revenue for the national budget. Recent calculations show that on April 8, the netback for West Siberian oil fell to 32,759 roubles, approximately $392 per metric ton.
The netback is used as a key benchmark for traders in determining domestic oil prices. It is derived from the price of Brent crude oil, excluding the discount applied to Russia’s Urals oil, which is currently estimated at $11.88 per barrel. Earlier this month, the price of Russia’s Urals blend for shipments from Primorsk, Ust-Luga, and Novorossiisk ports dropped to around $53 per barrel.
This figure is notably lower than the $69.7 per barrel average used for planning in Russia’s 2025 budget. The combination of decreasing oil prices and economic instability poses significant challenges for the Russian economy, hinging heavily on oil revenues.