Russian Oil Exporters Struggle to Stay Afloat as Discounts Deepen

Discounts on Russian oil at export terminals have once again approached historic highs, putting pressure on exporters' trade profits amid weak global oil prices, Reuters calculations show.

Western sanctions over Russia's military action in Ukraine have forced its oil companies to sell crude at steep discounts, reaching $20 to $30 per barrel below Brent in December - the widest gap at Russian ports since early 2022, Reuters data indicates.

The deeper discounts have eroded margins, pushing some suppliers into losses. Still, many firms remain profitable thanks to government tax relief, according to Reuters data

"Income in the production segment, on average, remains positive after covering taxes, production, and transportation costs. Some oil projects are indeed 'in the red,' including due to the complexity of extraction," said Kirill Bakhtin from BCS World of Investments.

TAX RELIEF KEEPS PRODUCERS AFLOAT

Preferential mineral extraction tax (MET) rates have been critical to maintaining profitability, analysts say. Reuters estimates that more than half of Russian oil producers qualify for zero or reduced MET rates, helping them cover costs and fund development.

Reuters calculations suggest companies benefiting from zero MET rates, about 20% of producers, earned trade profits of roughly $20 per barrel at