The discount of Russia’s flagship crude Urals to Brent has widened in recent days to the highest this year at $20 per barrel as the U.S. sanctions on Rosneft and Lukoil upend crude flows, industry sources told Russian daily Kommersant on Wednesday.
Urals has traded at a discount to Brent since the Russian invasion of Ukraine, with discounts susceptible to demand in China and India and the U.S. sanctions on Russia’s oil exports and industry.
The sanctions last month sent the discount surging again. As of Monday, Urals was priced $19.40 per barrel below Brent on a free-on-board (FOB) basis at the Russian Baltic Sea port of Primorsk and at the port of Novorossiysk on the Black Sea, widening from $13-$14 per barrel discount at the beginning of November, an industry source told Kommersant, citing data by Argus.
Before the U.S. sanctions from October 22, the discount was about $11-$12 per barrel.
The current price of Urals FOB at Primorsk and Novorossiysk includes a discount of about $20 per barrel to Brent, another source told the Russian daily.
The recent surge in the discount is the second time this year Urals has exceeded a $15 per barrel discount to Brent, after the Biden Administration’s last sanctions on Russia imposed in early January.
The widest discount was hit in 2022 and early 2023 – at over $30 per barrel below Brent, immediately after the Russian invasion of Ukraine and the introduction of a Russian oil embargo in the EU from 2023.
However, in those years, Brent was trading at between $80 and $120 per barrel, much higher than the current price.
The widening discounts will now weigh further on Russia’s oil revenues, the biggest budget income for the Kremlin to finance the war in Ukraine. October revenues for the Russian budget collapsed by 27% from a year earlier, as international oil prices dropped, sanctions on Russia intensified, and the Russian ruble strengthened.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com
- Mergers Are Back — But Wall Street’s Not Buying the Hype
- Global EV Sales Jump 23%
- India’s Top Refiner Looks to Buy Non-Sanctioned Russian Crude
