Russiahas balanced its budget at $114 a barrel this year as PresidentVladimir Putin is ramping up social military spending amid aconflict in Ukraine, which sent relations between Moscow and theWest to their worst since the end of the Cold War, Censor.NETreports citing Reuters.
Sanctionsare expected to slow new Russian oil projects, compounding adecline in output in the last months from the world's largestproducer.
Globaloil prices have been falling despite the conflict in Ukraine andviolence in Iraq due to poor demand from the weak global economyand booming U.S. oil supplies.
"Thegeopolitical premium has fallen close to zero," said analysts fromNordea bank.
Analystssaid declining oil prices would heavily weigh on the Russian stockmarket and the rouble, which is already trading near its all-timelows. Russia's $2 trillion economy depends on energy-related taxesfor half its budget revenues.
OnMonday, Urals crude in the Baltic traded at below $98 a barrel, itslowest since May 2013, the last time Urals traded under $100 perbarrel for a prolonged period of time.
In theMediterranean crude market, where oil supplies are slightly than inthe Baltic, Urals was trading at below $99 a barrel.
Thepressure on Urals will likely increase as preliminary Septemberloading dates showed healthy supply levels
In morebearish news, oil firm Surgut tendered to sell four early Septembercargoes in the Baltic and Rosneft also tendered to sell 0.3 milliontonnes from the Baltic and 0.22 million tonnes from theMediterranean.
Resultsare due later this week.
In thePlatts window, Total bought a 80,000-tonne Urals cargo from Vitolin the Mediterranean at dated Brent minus 70 cents a barrel, some35 cents weaker than previous price estimates, traderssaid.
BPoffered a larger Suezmax at dated Brent minus $1.00 per barrel,some 45 cents weaker than previous price estimates but found nobuyers.
Lukoilsold a cargo of CPC Blend to Eni at dated Brent minus 75 cents,some 20 cents weaker than previous price estimates, traderssaid.
In thepaper market, Urals was expected to weaken in September to datedBrent minus $1.15 a barrel while in the Baltic it was expected tostay at the current levels of dated Brent minus $2.