Russia's Oil Revenue Drops Despite Price Surge Due to Output Cuts and Rouble Strength

Russia's energy earnings have declined by 17% this year, despite a significant rise in crude oil prices. Finance ministry data revealed that tax proceeds from oil and natural gas production dropped to 5.47 trillion roubles ($64.43 billion) in the first nine months of 2026, down from 6.61 trillion roubles in the same period of 2025. The energy sector contributes around 20% of Russia's budget tax proceeds, which is expected to run a deficit of 3% of GDP in 2026, nearly double the planned figure.

The price of Russia's flagship Urals oil reached over $92 per barrel at the end of September, more than double its price before the Iran war and a Western price cap of $44.10. The highest price recorded this year was $113.89 on April 8, the highest since 2013, driven by supply disruptions in the Middle East. Additionally, reduced loadings at the Black Sea port of Novorossiysk due to security risks and a lack of tankers have supported Urals prices.

However, the price increase has been offset by a decline in output. Russia revised its outlook for crude oil and natural gas production and exports, marking a 17-year low. Crude oil production in August fell by more than 5.6% to 8.718 million barrels per day, down from 9.240 million bpd in January. The industry has faced challenges from Ukrainian drone attacks on oil refineries, leading to production cuts and shortages across the country.

Currency movements have also impacted Russia's revenue. From January to August, the rouble was on average 9% stronger against the dollar compared to the same period in 2025. Consequently, the average Russian oil price used for taxation increased to $66.70 per barrel from $59.12 a year earlier, a smaller rise than in its dollar price.