Investment Rating - The industry investment rating is "Overweight" for both Oil & Gas and Basic Chemicals sectors [5]. Core Insights - The recent US-India trade agreement, which reduces tariffs on Indian goods from 50% to 18%, is expected to lead to a decline in India's imports of Russian oil, thereby maintaining high discount levels for Russian oil [1][2]. - The combination of the US-India agreement and the potential appreciation of the Chinese yuan is likely to enhance the cost advantage for Chinese refineries in crude oil procurement [3]. Summary by Sections Section 1: US-India Trade Agreement - On February 2, 2026, US President Trump announced a trade agreement with India, which includes a significant reduction in tariffs on Indian goods and a halt to India's purchases of Russian oil [1][2]. - This agreement is expected to further decrease India's imports of Russian oil, which have already been declining due to EU sanctions [2]. Section 2: Russian Oil Discount Levels - The discount for Russian ESPO oil compared to Brent has increased significantly, exceeding $10 per barrel since late October 2025, reaching $17.15 per barrel by the end of January 2026 [1][2]. - The ongoing geopolitical tensions and sanctions are contributing to this widening discount, which is expected to remain elevated [2]. Section 3: Chinese Refinery Cost Advantage - China's crude oil imports are projected to grow by 4.6% year-on-year to 580 million tons in 2025, with significant contributions from Russia, Saudi Arabia, Iraq, Malaysia, and Brazil [3]. - The depreciation of the US dollar against the Chinese yuan since December 2025 is leading to a divergence in the import price index for crude oil, suggesting a potential cost advantage for Chinese refineries [3].

Core Viewpoint - In January, Russia's oil revenue fell to its lowest level in over five years, primarily due to declining global oil prices, increased discounts on Russian oil, and a strengthening ruble impacting the fiscal situation [1] Group 1: Oil Revenue Decline - Oil-related tax revenue in January dropped by 50% year-on-year to 281.7 billion rubles (approximately 3.7 billion USD) [1] - Total revenue from oil and gas also decreased by 50%, amounting to 393.3 billion rubles [1] - Oil and gas revenues account for about one-quarter of Russia's total fiscal income [1] Group 2: Price and Discount Dynamics - The price of Brent crude oil futures fell by 15% year-on-year during the fiscal period [1] - The price of Russia's flagship Urals crude oil was approximately 26 USD per barrel lower than the benchmark Brent crude [1] - A year ago, the discount on Urals crude was just over 12 USD per barrel [1] Group 3: Currency Impact - The ruble strengthened significantly, with an average exchange rate of 78.4368 rubles per USD in December, appreciating nearly 25% compared to the previous year [1]