Overview
Data released on Tuesday based on official calculations show the rouble-denominated price of Russian oil fell by 11% in May compared with April. The measured period covers May 1 to May 22, during which the average price reached 6,518 roubles per barrel, down from April's average of 7,299 roubles per barrel. April's average had been the highest since October 2023.
Drivers of the decline
Two factors are identified in the calculations as contributors to the fall. First, the rouble strengthened over the period, which reduces the local-currency price when international crude prices are converted into roubles. Second, international oil benchmarks retreated from their April peaks as markets priced in expectations of a deal that could end the conflict in Iran, easing supply concerns.
Fiscal implications
Russian authorities use the rouble price of oil as the basis for calculating the mineral extraction tax on production. That tax is the single largest levy on the oil sector and represents about one-fifth of total federal budget receipts. Despite the May drop, the current rouble price remains roughly 20% higher than the price the federal budget assumes for 2026.
The budget's pricing assumption stands at 5,440 roubles per barrel, which corresponds to an assumed dollar price of $59 per barrel given a rouble exchange rate of 92.2 to the dollar. Those parameters are used to set government spending and revenue plans for 2026. The budget target was fixed prior to the escalation in late February when U.S.-Israeli airstrikes on Iran led to a spike in geopolitical tensions and energy-supply disruption.
Current market context
International crude prices traded just below $100 per barrel on Tuesday, a decline from levels that exceeded $120 per barrel in April. The combination of a firmer rouble and softer international crude pushed the domestic rouble price of Russian oil lower in May.
Key considerations
- The rouble price drop reflects currency appreciation and weakening global crude prices over the measured period.
- The mineral extraction tax, a major component of federal revenue, is calculated from the rouble price, tying oil market moves directly to budget outcomes.
- Despite the fall, the rouble price remains materially above the federal budget assumption for 2026, which could affect fiscal planning if the divergence persists.