Russia has little reason for a drastic change since its energy revenue is solid, oil prices are higher than its projections, and its budget deficit is shrinking as the world’s most influential oil producers consider additional supply reductions.

The Organization of the Petroleum Exporting Countries (OPEC) and its alliance known as OPEC+ will meet on Sunday in Vienna.

Three OPEC+ sources told Reuters that OPEC+ will decide whether to reduce oil supply further. At the end of September, prices had dropped by 16% as the world’s largest producer, the United States, continued to maintain record-high crude output. The market was worried about growing demand, particularly from China, the world’s top oil importer.

Regarding the upcoming OPEC+ conference, a source close to the Russian government stated, “I don’t see any reasons to change something radically,” under the condition of anonymity.

The source also mentioned that surprises could yet occur during the in-person meeting.

In a series of measures that began in late 2022, Saudi Arabia, Russia, and other OPEC+ members have already committed to cutting oil supply by 5.16 million barrels daily, or roughly 5% of daily global consumption.

The “COMFORT ZONE”
According to President Vladimir Putin, despite the West’s most severe sanctions ever placed on a major economy, including capping Russian oil’s price at $60 per barrel, Russia has not only survived but thrived.

According to Russian predictions, Russia’s GDP is expected to increase by about 3% this year, faster than the U.S. or the Eurozone, following a recession in 2022.

Due to this year’s high global oil prices and Moscow’s expanding use of a fleet of covert tankers, most Russian oil has traded above the Western oil cap price.

Independent oil researcher Alexei Kokin, located in Moscow, stated that oil prices have dropped from “very comfortable” to “just comfortable” levels. “It appears that there is no particular necessity for a move (for Russia) because of this. The speaker stated that it is acceptable to leave the production constraints in place.

This year, Russia plans to charge 4,788 roubles ($53.36) per barrel for the Urals, its flagship oil grade. Friday saw a drop in the price of Urals below the $60 per barrel Western price cap as freight rates increased due to new U.S. sanctions against shipowners and a decline in world oil prices.

Nonetheless, it remained above 5,000 roubles per barrel and surpassed $60 per barrel once more on Tuesday.

According to budget plans released in September, Brent crude prices are expected to average $85 per barrel in 2019 (a lower estimate than that of a Reuters poll), and the price of Urals would be $71.30.

Russian Income

The influx of quarterly tax payments, a decrease in the ruble’s value, and rising oil prices contributed to Russia’s budget deficit narrowing last month. During the first ten months of the year, the deficit was 1.24 trillion roubles ($13.45 billion), or 0.7% of GDP. That was a far cry from the original projections, which called for a 2.93 trillion rouble deficit, or 2% of GDP, for 2023.

Although it had decreased by 26.3% in the first ten months of the year, oil and gas revenue in October was up 27.5% from the previous month.

However, the percentage of energy sales revenue included in government budget revenues has significantly decreased. Previously, this percentage exceeded 50% of overall budget revenue.

The percentage of total budget revenue that went toward oil and gas sales in January through September of this year was 28.3% of the total revenues of 19.73 trillion roubles ($220 billion). In 2022, that percentage was 41.6%.

Russia is still a superpower in terms of natural resources. It continues to be the most popular grain in the world. In addition, it exports various goods, like fertilizers. A 300 billion rouble windfall tax, additional fees, and the added value tax are its other primary sources of budgetary income.

“As long as oil stays between $75 and $100 a barrel, the Russian budget will tend to favor current oil output targets,” stated Ronald Smith, a senior analyst at BCS World of Investments in Moscow. “The Russian budget is more sensitive to oil prices and the rouble exchange rate than oil production.” On Tuesday at 08:36 GMT, Brent crude futures were down 41 cents, or 0.5%, at $81.91 a barrel.