Market Update: Russia’s Oil Is Beating Global Prices, Padding the Kremlin’s War Chest – Full Analysis

Russia is cashing in on one of the biggest oil shocks in history, with its crude now selling above global prices as buyers scramble for alternatives.

The shift marks a stark turnaround for Moscow, which had been forced to sell oil at steep discounts following Western sanctions over the war in Ukraine.

Disruptions to tanker traffic through the Strait of Hormuz — the world’s key oil shipping chokepoint — alongside a limited US sanctions waiver on some Russian shipments have reshaped trade flows as countries scramble for supplies.

“Outside the Persian Gulf, the only country with ample spare capacity is Russia, whose volumes are affected by policy-driven production cuts but physically recoverable on a shorter timeline if commercial conditions allow,” wrote Paola Rodriguez-Masiu, the chief oil analyst at Rystad Energy, in a Thursday note.

The reversal has been swift. Russian Urals crude had traded at discounts of as much as $12 below North Sea Dated oil, a key global benchmark for physical crude. In recent weeks, it has flipped to roughly a $4 premium, according to Rystad, a research and intelligence company.

Russian Deputy Prime Minister Alexander Novak flagged the shift on Thursday.

“Today, when there’s a shortage on the market, our oil and petroleum products are in demand, and, as we see, discounts have decreased, and in some areas, sales are now even at a premium,” Novak said.

Russian President Vladimir Putin also acknowledged the windfall but warned against overspending.

“We must remain reasonable and prudent. Markets that have swung in one direction today can move the opposite way tomorrow,” Putin said on Thursday.

Russia’s oil revenues had been declining before the US and Israel attacked Iran at the end of February, but the conflict flipped the narrative.

Since then, Russia’s oil exports have doubled from $135 million a day in January to $270 million a day, according to Julian Lee, an oil strategist at Bloomberg.

Higher oil revenues are feeding into the Kremlin’s war chest as the war in Ukraine drags on, underscoring how geopolitical turmoil in one region can reshape the economics of another conflict.

Oil and gas revenues have historically accounted for more than a third of Russia’s federal budget, which has been under pressure from sweeping sanctions over the past few years. Official estimates showed Russia’s economy grew 1% in 2025 — down sharply from its 4.3% growth in 2024.

Iran war flipped the oil market’s narrative

Before the Iran war, the oil market was cushioned by ample inventories and expectations of a roughly 3 million barrel-per-day surplus this year, Rystad estimated.

But that buffer has now been largely exhausted as disruptions in the Strait of Hormuz and damage to energy infrastructure take hold.

Rystad estimates that production has dropped below pandemic-era lows — “a number that dwarfs anything the IEA releases can offset on a sustained basis,” Rodriguez-Masiu wrote.

Earlier this month, the International Energy Agency announced plans to release 400 million barrels from strategic reserves to address market disruptions.

Crude oil prices surged after the conflict began, with international benchmark Brent futures soaring to near $120 a barrel. Oil prices have since pulled back but remain volatile.

Brent and US West Texas Intermediate crude oil futures were about trading around $107 and $93.50 per barrel, respectively, in early trade on Friday.

The market may face more turbulence ahead. Despite initial resilience in the first four weeks of the war, that buffer is now gone.

“The global oil system can no longer absorb shocks the way it could three weeks ago,” Rodriguez-Masiu wrote.