Report · Oil markets
Why Russian Oil Is Regaining Pricing Power
A tighter physical market narrowed the discount on Russian Urals crude. The report argues that the change was cyclical, driven by Asian demand, disrupted competing supply and adaptation to sanctions.
Co-authored with Audrey Levin Kim and Benjamin Lozovsky.
Full report: 10-minute read.
How Urals moved closer to Brent
2022–2023
Steep discount
Sanctions, shipping constraints and fewer buyers kept Urals below Brent.
Hormuz crisis
Premium above US$10/bbl
Disrupted competing supply helped Urals trade above Brent.
Early August 2026
Near parity
Urals and Brent were close to parity at around US$75–85 a barrel.
Three observations quoted in the report, not a continuous price series. The report judged the convergence cyclical.
Summary
For much of 2022 and 2023, Urals traded at a steep discount to Brent because of sanctions, shipping constraints and a smaller pool of buyers. The report traces how that gap narrowed. During the Hormuz crisis Urals traded at a premium of just over US$10 a barrel to Brent, and by early August 2026 the two were close to parity at around US$75–85.
Our view was that the convergence was cyclical. We expected the discount to stay relatively narrow while Asian demand was strong and Middle Eastern supply uncertain. Once conditions settled, we expected the differential to move within a narrower range of US$5–15 a barrel, without returning to the deep discounts of 2022–2023.
Key findings
Three forces narrowed the gap: resilient demand in Asia, supply risk elsewhere, and sanctions frictions that parallel shipping, insurance and payment systems had partly mitigated over time.
A narrower discount does not mean sanctions have stopped mattering. Their effect on price depends on physical market conditions.
The discount could widen again if Middle Eastern supply normalises, Indian and Chinese buying weakens, Russian export availability rises or sanctions enforcement tightens.
What would change the view
Would weaken the view
- Refinery disruption reduces Russia’s own crude use, releasing more barrels for export and pressuring prices.
- Stronger sanctions enforcement on tankers, insurers, banks and third-country intermediaries makes buyers more cautious and encourages them to demand a larger discount as compensation.
Would move it either way
- Hormuz traffic recovers and Gulf producers restore exports, giving Asian refiners more alternative barrels; the report says this would weaken Russia’s bargaining position and probably widen the Urals discount. It calls this the clearest risk to its view, but also expected the end of the supply shock to show that the convergence was cyclical.
- Refinery maintenance, weaker margins or high inventories cut Indian and Chinese spot buying, leaving Russian sellers competing for fewer customers. That would remove the strong Asian demand behind the narrow discount, but the report lists demand changes among the off-ramps that make it too soon to write off the discount.
Conditions as set out in the report when it was published.
Read the full report for the complete analysis.
Read the full report at 6:05 MarketsDated analysis from August 2026. Views reflect the information available at the time and have not been updated. Nothing here is investment advice.