The differential of Russian Urals crude in Rotterdam has firmed to its highest level against the benchmark in over two-and-a-half years as supply continues to be reduced from the Baltic port of Primorsk.

S&P Global Platts assessed Aframax cargoes of Urals, basis CIF Rotterdam, at a discount of 68 cents/b to the Mediterranean Dated Strip on Wednesday, its narrowest discount to the 13-28 day forward Dated Brent market since November 21, 2014, when it reached minus 65 cents/b.

The differential has risen 32 cents/b this week so far, with most of the increase coming from Wednesday’s 27 cents/b hike.

Pipeline maintenance on Russian pipeline operator Transneft’s link to the port of Primorsk since early May, undertaken in an effort to increase Russia’s diesel throughput, has also lowered Urals export volumes from the Baltic, with a knock-on increase in volumes from the Black Sea and into Belarus.

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Crude used to be shipped to Primorsk through two pipelines along the Gorky-Yaroslavl route, one with a 800 mm diameter and the other with a 500 mm diameter, according to Transneft. But the 800 mm pipeline is currently being converted to ship diesel, with crude transported only through the 500 mm pipe.

Transneft wasn’t immediately available for comment on the matter.

The strong uptick in Northwest European Urals has also meant that the the grade CIF Rotterdam has flipped once again to a premium to CIF Augusta material.

CIF Rotterdam Urals stood at a 4 cents/b premium to CIF Augusta Wednesday. Baltic-loading Urals has traded at a premium to Urals from the Black Sea several times since late June, as the impact of the shorter Primorsk loading program is starting to be felt in the market.

“I think there were still sufficient reserves around throughout June that could initially prevent the grade from hiking up strongly, but I think we have now moved to a phase where Urals in storage is limited and alternative grades are also in short supply and expensive,” a trading source said.

–Marcel Goldenberg, marcel.goldenberg@spglobal.com
–Edited by James Leech, james.leech@spglobal.com

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