Economy

Oil is getting cheaper again, and this is bad news for Russia

Crude oil prices declined in early trading on Tuesday in Asian markets as investors lowered their expectations for demand growth due to the ongoing trade war between the United States and China, the world’s two largest economies. This is reported by "Komersant Ukrainian" with reference to Reuters.

According to OilPrice.com, futures for Brent crude oil fell by 45 cents, or 0.68%, to $65.41 per barrel as of 06:42 Kyiv time. Futures for US West Texas Intermediate (WTI) fell 32 cents, or 0.52%, to $61.37 per barrel. Both benchmark oil grades lost more than $1 on Monday.

Trade wars

US President Donald Trump’s policy of reforming world trade by imposing tariffs on all US imports has created a high risk that the global economy will enter a recession this year, according to most economists surveyed by Reuters.

China, which was hit with the highest tariffs, responded with its own levies against US imports, only fueling a trade war between the two largest oil consuming countries.

Meanwhile, U.S. crude oil inventories likely rose by about 500,000 barrels in the week ended April 15, according to a Reuters preliminary survey of analysts.

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Forecast

This prompted analysts to sharply lower their forecasts for oil demand and prices.

Barclays on Monday lowered its 2025 Brent oil price forecast by $4 to $70 per barrel. The bank cited increased trade tensions and a change in production strategy by the OPEC group as factors that will lead to an oversupply of 1 million barrels per day this year.

Several OPEC members will propose accelerating production increases for a second straight month in June, sources told Reuters last week.

“A significant decline in (oil) prices looks likely if exporting countries increase production,”

– oil analyst Philippe Verleger said in a report.

Russia is already hurting

It is well known that Russia is critically dependent on its energy exports. First and foremost, on oil exports. In 2024, the federal budget revenues from oil sales amounted to 9.19 trillion rubles (approximately $89.4 billion). Total budget revenues for this period amounted to 36.71 trillion rubles. Thus, the share of oil revenues in the total structure of Russian budget revenues in 2024 was approximately 25%

This indicates that, despite international sanctions and attempts to diversify revenue sources, oil remains a key source of financing for the Russian budget.

Russian Urals oil is traditionally sold at a lower price than Brent and WTI, and it is also subject to additional factors that raw materials from other countries do not experience, namely Western sanctions. However, during all three years of the full-scale war with Ukraine, Russia has been successfully selling its oil – its main buyers today are China and India.

The federal budget of the Russian Federation for 2025 included an oil price of $70. Meanwhile, due to the collapse in the global oil market caused by Donald Trump ‘s trade war and OPEC’s decision to further increase production, the price of Russian Urals oil, according to the Ministry of Finance, was $60 per barrel on April 25.

So far, market analysts’ forecasts do not promise Russia any serious problems related to the price of oil, as it still has a very large backlash for sales. According to economic expert Oleg Pendzin, even a price of $50 per barrel is still acceptable for Russia.

“Currently, the direct cost of Russian oil production is about $37-38 per barrel. This is the direct cost. The critical figure for Russia is the sales price of $45,”

– the economist explained exclusively for .

So the more likely way to hurt Russia over oil is still to increase sanctions, including secondary sanctions against its buyers. The point of this step is to make it physically impossible for Russia to sell large volumes of oil and thus receive funds to continue its aggressive war of aggression.

However, back during his election campaign, after making statements about ending the war in 24 hours or 100 days, Donald Trump made a very realistic statement. He said that in order for Russia to lose the ability to fight, it would be enough to simply collapse oil prices. And he seems to be going to do that if Russia does not make concessions. Whether Trump realizes it or not, this is exactly the scenario that is happening now.

The Russian economy is already slowing down significantly at current oil prices, the industry is stagnating, and recession looks like a very real prospect.

And if the downward trend in prices continues, the figure of $45 per barrel does not look so fantastic.