London: An alliance of countries that includes Russia is cutting oil production to end a global glut. One of the big winners: the nation’s own crude exporters.
The supply cuts from the so-called Opec+ nations, coupled with US sanctions on Venezuela and Iran, have reduced the amount of medium- and heavy-grade sour crude on the market. While Russia is part of the output cuts effort, exports of its medium-sour Urals crude — the country’s biggest export grade — are set to soar this month to an almost two-year high, report agencies.“The apparent lack of other alternative medium, sour grades is forcing Mediterranean and Northwest European buyers to rely increasingly on Urals,” consultants JBC Energy GmbH said in a report.
So even as Opec+ starves the global market of heavier grades, Russia’s exports are surging. Shipments of Urals from the Baltic ports of Primorsk and Ust-Luga and Novorossiysk on the Black Sea are set to rise to 2.06 million barrels a day combined, according to Bloomberg calculations from loading programs. Russia’s overall crude exports are set to rise to 5.7 million barrels a day in April, ESAI Energy LLC said in a report last week, noting that much of that will go to Asian countries.
Last month, Lukoil Senior Vice President Vadim Vorobyov said global demand for high- and mid-sulphur grades such as Urals should increase because of the Opec+ supply cuts and US sanctions on Venezuela and Iran. He also noted that Urals’ value versus Brent crude could rise.
In Northwest Europe, the grade traded at a 50 cent premium to benchmark Dated Brent earlier this month, its firmest since reaching a five-year high in January, according to traders and brokers monitoring the Platts window. In the Mediterranean, potential buyers sought the grade at a 65 cent premium to Dated Brent — the strongest bid in the Platts window since July 2013 — though there were no sellers.