The elusive nature of Russia’s primary crude grade, Urals, persists as its price continues to hover below the G7’s $60 per barrel price ceiling. However, a significant disparity between export and import prices suggests that the actual dynamics of Russian crude trade are more intricate than meets the eye.
The imposed price cap on Russian crude by the EU, G7, and Australia took effect on December 5. Buyers who acquire Russia’s crude at $60 or less per barrel gain unrestricted access to all EU and G7 insurance and financing services associated with the transportation of Russian crude to non-EU nations.
When rumors of a price cap initially surfaced, the price of Urals experienced a dramatic plunge compared to the Dated Brent benchmark. Since late last year, the Urals discount to Brent has consistently been $20 or more per barrel.
According to Bloomberg, the official price of Urals remains below the $60 per barrel threshold, averaging $52 per barrel at Primorsk, Russia’s Baltic Sea port, throughout June, as reported by Argus data.
Nonetheless, the Urals trade is shrouded in complexity. Bloomberg’s analysis reveals a discrepancy between the export price in Russia and the import price in India. This month alone, the $12 per barrel gap, when multiplied by volumes, indicates that shipbrokers, traders, and vessel owners may be receiving a staggering $900 million monthly for handling Russian crude oil.
Traders earlier disclosed that Russian exporters were offering discounts of $15 to $20 per barrel, while simultaneously paying shipping companies $15 to $20 per barrel for the transportation of the crude to Asia. The business of shipping Russian crude oil to Asia has become remarkably lucrative, with one trader describing it as “crazy good” in a conversation with Reuters back in February.
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