Oil Prices Plunge to Six-Month Low, Threatening Russian Economy
London, UK – Brent crude oil prices have fallen below $62 per barrel for the first time since spring, according to a recent report by the International Energy Agency (IEA), sparking concerns about the impact on oil-dependent economies, particularly Russia. The rapid decline is driven by a surge in supply outpacing demand, with the IEA forecasting a potential surplus of up to four million barrels per day by 2026.
The price drop was further accelerated by the easing of geopolitical tensions following the end of the Israeli-Palestinian conflict, which had previously supported higher oil prices.
The IEA report indicates that OPEC+ nations have significantly increased production, adding 2.2 million barrels per day to the market in the last six months, with another 1.6 million expected in the coming months. This influx of supply has created a glut, presenting a particularly challenging scenario for Russia.
Currently, Russian Urals crude is selling at a discount of approximately $50 per barrel compared to Brent. Investment expert Yevgenii Kogan estimates that each dollar decrease in global oil prices results in a loss of 160 billion rubles annually for Russia.
With Brent trading at $62, the Kremlin faces increasing difficulty in maintaining its economy, as oil revenues are a primary source of funding for the national budget, the ongoing war, and social programs. Falling below $60 per barrel risks disrupting the flow of “oil dollars,” potentially forcing the Finance Ministry to draw upon the National Welfare Fund to cover budget shortfalls. Adding to the pressure, the United States is reportedly increasing pressure on India, resulting in a 15% reduction in their purchases of Russian oil.
