Overview
Russian Urals crude climbed to levels not seen in over 13 years as a broader oil market rally linked to Iran boosted export prices. Data from Argus Media show Urals at Russia's Primorsk port on the Baltic coast trading at $116.05 a barrel on Thursday, a price that excludes shipping costs.
Price moves at export hubs
At the Black Sea terminal of Novorossiysk, Argus Media reported Urals at $114.45 a barrel on the same day. Those figures stand in sharp contrast to the roughly $59 a barrel average price that Russia assumed in its budget for this year, meaning current spot levels are nearly twice the budgeted assumption and are generating substantial additional oil receipts for the state.
Discounts, premiums and delivery spreads
The typical discount of Urals from Russia's western ports to the global Dated Brent benchmark has contracted to below $27.75 a barrel, the narrowest gap since mid-December, according to the data. Separately, when Urals is delivered to India it is trading at a premium to Brent; that premium widened to $6.1 a barrel, up from $3.9 two weeks earlier.
The data note that it is not clear whether the difference between export and delivered prices - the delivery spread - ultimately accrues to Russia.
Market backdrop
Observers point to disruptions linked to the Middle East as a factor tightening world supply: the conflict has curtailed roughly a fifth of the oil volumes that pass through the Strait of Hormuz. That reduction in flows is consistent with the broader rally supporting higher Urals prices at key Russian export terminals.
Implications
Higher Urals prices are providing the Kremlin with larger near-term oil revenues than those baked into the current fiscal plan. At the same time, narrower western-port discounts and rising delivery premiums are changing the price dynamics exporters and buyers face, though who ultimately benefits from delivery spreads remains uncertain.
Key takeaways
- Urals rose to $116.05 a barrel at Primorsk and $114.45 at Novorossiysk, per Argus Media.
- Current Urals prices are almost double the $59 a barrel assumption in Russia's budget for this year.
- The discount to Dated Brent narrowed to below $27.75 a barrel, while the India delivery premium widened to $6.1 from $3.9 two weeks earlier.
Areas of uncertainty
- It is unclear whether the widening delivery premium ultimately accrues to Russia or other market participants.
- Supply disruptions through the Strait of Hormuz, which have removed roughly a fifth of flows, contribute to volatility in prices and trade flows.