Russian oil received a premium to Brent in key Asian markets
Russian Urals oil sharply increased in price amid a global supply shortage. According to market indicators, on September 16 its price reached $121.61 per barrel compared to about $111.8 a day earlier. In some Asian markets, Russian oil is already sold not at the usual discount, but at a premium to Brent.
The Urals Crude Oil index, published by Cbonds, recorded a price of $121.61 per barrel on September 16. On September 15, the Urals quote was $111.77, and at the beginning of the month it was about $81 per barrel.
Thus, in just the beginning of September, Russian oil according to this indicator rose in price by about 50%.
However, comparing a single Urals quote directly with Brent futures needs to be done with caution. Russian oil does not have a single universal price: its cost varies significantly depending on the port of loading, delivery cost, sanctions risks, and destination market.
Yet the price situation in the physical market has also changed sharply. According to S&P Global, Urals delivered to the west coast of India has been trading at a premium to Brent since September 8. As of September 14, the premium was about $1.05 per barrel, whereas a month earlier Russian oil was sold there at a discount of $3.20.
Argus data also show an increase in the premium. Urals delivered to China's Shandong province was estimated about $6 per barrel higher than Brent futures, and for deliveries to India the premium to Dated Brent reached about $2.25.
At the same time, Russian oil sold directly from Baltic ports still retains a significant discount. S&P Global estimated Urals in Primorsk on September 14 at a discount of $21.65 to Dated Brent. This shows how much the final price now depends on logistics and delivery point.
The main reason for the sharp narrowing of the discount was supply problems in the global market. The escalation in the Middle East and problems with key transportation routes forced buyers to compete more actively for available oil cargoes.
Additional pressure arose after damage to the strategic Saudi East-West pipeline, which allows transporting oil from fields in eastern Saudi Arabia to the Red Sea bypassing the Strait of Hormuz. Its capacity reaches about 7 million barrels per day.
Saudi Arabia expects to restore about half of the pipeline capacity within the next few days, and to fully return it to operation in about six weeks. On these reports, Brent on Thursday, September 17, began to decline and traded around $104 per barrel.
Meanwhile, the physical market remains tight due to limited supply routes, risks in the Strait of Hormuz and Bab el-Mandeb, and disruptions in some Russian oil flows.
S&P Global notes that buyers have become more active in raising bids even for oil under sanctions restrictions. This allowed Russian exporters to significantly narrow the traditional Urals discount, and in some Asian destinations, to switch to a premium.
Source: Cbonds, S&P Global, The Wall Street Journal
