However, Russia also acknowledges that the surge in oil prices has ended and has revised down its expectations for oil and gas revenue for the entire year.

Based on data from the Russian Ministry of Finance, calculations by institutions have determined that in May, the Russian Federation's budget revenue from oil sales increased by nearly 50% year-on-year, reaching 632.5 billion rubles ($7.1 billion); total revenue from the sale of oil and gas increased by 39%, amounting to 793.7 billion rubles.

The surge in Russian oil and gas taxes is attributed to the rise in prices of its main export blend, Urals crude oil. The Ministry of Finance calculated the taxes for May based on a price of $74.98 per barrel of Urals crude, higher than the $58.63 of a year earlier. Despite the G7 setting a price cap of $60, the discount of this blend relative to the global benchmark Brent crude has narrowed.

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The G7's measures aim to reduce the inflow of petrodollars to Russia by limiting its access to Western shipping and insurance services, while maintaining the supply of Russian oil on the global market. However, Russia has adapted to Western sanctions by utilizing a vast shadow fleet and selling its oil to Asian customers.

According to the institution's calculations, on a monthly basis, Russia's total revenue from oil and gas sales actually decreased by more than 35% in May. This was mainly due to the country not levying a profit tax in May. This oil tax is collected four times a year, in March, April, July, and October.

If it were not for the huge subsidies to domestic fuel producers, Russia's oil revenue last month could have been higher. According to the Ministry of Finance, the government paid nearly 202 billion rubles to domestic diesel and gasoline supply companies. This sum partially compensates for the price difference between automotive fuels in Russia and abroad for refiners.

Downgrading oil and gas revenue expectations

Despite the year-on-year increase in oil and gas revenue, Russia still proposes to revise down the total revenue expectations for the industry in 2024. The draft state financial修正ion bill shows that the industry's contribution to its budget this year is expected to be 10.99 trillion rubles, compared to an earlier estimate of 11.5 trillion rubles.

According to the draft修正ion bill published on the parliament's website, the government expects the export prices of Russian crude oil and natural gas to decline this year, acknowledging that the price surge in 2022 has long ended, thus downgrading revenue expectations.

Russia expects the country's crude oil price to reach around $65 per barrel this year, compared to an earlier forecast of $71.30 per barrel. The average export price of natural gas is expected to be $252.80 per thousand cubic meters, a nearly 6% decrease from the current version of the budget forecast.International oil prices have traditionally been higher than Urals crude prices, but due to slow demand growth, the former is now close to a four-month low. The risk premium brought about by the Middle East war has also disappeared.

The OPEC+ decision last Sunday to gradually restore some oil production from October this year has exacerbated market concerns about potential oversupply. This week, for the first time in five months, Saudi Arabia has lowered the official selling price of Arab light crude oil to Asia, also showing concern for the demand outlook.