Prices for supplies of flagship Russian Urals oil to China have fallen to an unprecedented low level amid weakening demand for this grade from Indian processors, which has reduced competition for parcels. This is reported by Bloomberg.
According to market participants, this week Urals supplies were estimated to be about $10 per barrel lower than Brent futures. For comparison, in August, premiums of around $1 per barrel were offered against Dated Brent quotes.
The oil market is tracking changes in flows that Western buyers have abandoned. Initially, Indian refineries sharply increased purchases of displaced volumes, taking advantage of the cheapness of oil. However, their appetite weakened after U.S. sanctions against Lukoil and Rosneft, although a recent purchase by Reliance Industries showed that some demand remains.
A recent decline in Russian oil exports to a minimum since August confirmed the overall trend, as Moscow faced increasing difficulties in delivering barrels to its key buyer — India. Deliveries to this South Asian country, which is the third largest oil importer in the world, dropped to a minimum in December for more than three years.
This put pressure on Urals prices while simultaneously opening opportunities for Chinese refineries, although traditionally this grade has not been supplied to China in large volumes. Urals is exported from Western ports of Russia, which means it is far from processors in the largest economy in Asia, who usually purchased more of the Russian ESPO grade (VSTO), shipped from the Far East.
According to Kpler, Urals imports to China this year have increased to approximately 400,000 barrels per day, which is a record high. Data from Vortexa Ltd. shows a similar trend.