Russian Urals crude discount falls $4.35/b on the day

Russian Urals crude has dropped to its lowest level ever relative to Dated Brent with its differentials weakening by $4.35/b day on day as the threat of international sanctions on Russian energy and financial services sparked a Urals selling frenzy in the market.

CIF Rotterdam Urals was assessed at Dated Brent minus $11.23/b for Baltic loading cargoes and CIF Augusta at Dated Brent minus $10.93/b Feb. 24, over $4/b lower than the previous record low of Dated Brent minus $7.78/b on a CIF Rotterdam basis in 2006, according to S&P Global Platts data.

In the Platts Market on Close assessment process there were a total of five offers for Baltic loading cargoes basis delivery into Rotterdam. Trafigura offered one CFR cargo loading March 6-10 at Dated Brent minus $11.60/b, Litasco offered one CFR cargo loading March 6-10 at Dated Brent minus $11.10/b and Trafigura offered one CFR cargo loading March 9-13 at Dated Brent minus $9.75/b. Glencore also offered a cargo for March 7-11 but withdrew the indication at Dated Brent minus $10.30/b. Trafigura also offered a cargo for March 16-20 but withdrew their indication at Dated Brent minus $9.95/b. There were no trades reported during the Platts Market on Close assessment process.

"I hear that refiners are stepping back from buying Urals, and many shipowners are saying they are unsure if they will call at Russian ports -- Black Sea or Baltic," a European refinery buyer said. While Russian banks were hit by further sanctions from the US and UK, it remains to be seen whether crude oil will be directly sanctioned..

"It is not often such extreme events happen in our lives," said a Middle Eastern trader, emphasizing the far-reaching ramifications of the slump in Urals values on the global crude market.

Further pressure on Urals differentials have come from potential disruptions in the Black Sea. Ship owners were heard to be cautious travelling to Black Sea terminals and that has not only impacted Urals in the Med, but Russia's Siberian Light and Kazakhstan's CPC Blend, which all load from the Black Sea port of Novorossiisk.

With uncertainty in shipping and credit markets, traders hope the market will gain clarity in the coming days, but in the meantime end-users have been looking away from Russian-loading crudes, which could provide support for alternative North Sea grades such as Forties and Johan Sverdrup.