Russia’s medium sour Urals crude market in Northwest Europe sank to the lowest level since September 2016 Friday, on a confluence of factors including a strongly backwardated Dated Brent market, competing alternative crudes, and reduced demand at the tail end of refinery maintenance season.
On Friday, Urals Aframax cargoes, basis CIF Rotterdam, were assessed at a $2.995/b discount to the Mediterranean Dated Strip, down 22 cents from Thursday’s assessment and the lowest since they were assessed at a discount of $3.06/b on September 30, 2016.
The rapid slide in Urals actually began Thursday when there were five 100,000 mt Urals offers in Northwest Europe in the Platts Market on Close assessment process, all for cargoes loading in the second and third decade of April.
Urals was assessed on Thursday, April 12, at Dated Brent minus $2.775, down 60 cents/b from the previous assessment.
While Thursday there were two trades in the Platts MOC, there were no trades on Friday. Two offers — one from Trafigura for a 100,000 mt Urals cargo, loading April 23-27 CIF basis Rotterdam at Dated Brent minus $3.15, and one from Gunvor for 100,000 mt Urals cargo, loading April 27-May 1, at Dated Brent minus $2.90/b — were left outstanding at the 16:30 London close.
“We had a huge fall last week — I think the market saw the physical [oil] reality,” one Urals trader said Monday. “There’s heavier West African crude weighing on the market due to China not taking as much, more and more CPC Blend, and some US barrels — alternative barrels all available, and also some maintenance. It’s a combination of small factors, each of them alone not essential but together they made a bearish picture.”
According to traders, local demand for second and third decade Urals cargoes has been dampened, due to the tail end of spring refinery maintenance in Northwest Europe, and sellers had to discount cargoes even further, as the Dated Brent structure moved into a steeper backwardation from mid-last week.
“With Dated Brent getting stronger, and the peak of the curve hitting April 23-27, it’s difficult. You can’t float, you can’t store, you have to either run it or get rid of it,” said one Urals trader on Friday.
He added that with the backwardation still in effect, it would also make for a slow start to May trading as refineries would be likely to run down any stocks of crude before returning to the spot market.
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Riding the wave: The Dated Brent benchmark at 30 years old and beyond
As crude production in the North Sea continues to evolve, its role in an increasingly globalized market has started to shift, having an impact on Dated Brent and its position as a global oil benchmark. In this report, S&P Global Platts delves into the dynamics affecting the North Sea and Northwest Europe crude markets and the continuing evolution of Dated Brent.