Russia’s medium sour crude Urals’ discount to Dated Brent has dwindled over the past week due to a shorter Baltic loading program for November and improving refinery margins, including fuel oil cracks, trading sources said.
Northwest European Urals cargoes have reached an almost three month high as a result.
On Tuesday and Wednesday, Platts assessed Aframax cargoes of Urals, basis CIF Rotterdam, at a discount of $2.045/b to Dated Brent — the smallest differential since August 2 when it was at a discount of $2.00/b to Dated Brent, according to S&P Global Platts data.
“So far, the North is moving higher, with fewer cargoes, a deep contango in Dated and fuel cracks are strong,” said one Urals crude trader.
The Baltic Sea’s Primorsk schedule, where the bulk of the Urals program loads, is set at 3.8 million mt for November, down a significant 1.303 million mt from October, according to the provisional loading program seen by S&P Global Platts.
There are 38 Aframax cargoes of 100,000 mt due to load over November in Primorsk. Daily loadings are scheduled to average 886,258 b/d, down 303,893 b/d from October to make it the smallest program since January when 3.71 million mt loaded at the port.
“Earlier, it looks like maybe a bearish situation for November on Urals – but the current scenario lies in the good refining margins, which are excellent, combined with the shorter program in the north,” said a second Urals trader.
Additionally, as Urals has firmed in the North, the arbitrage route between NWE and the Mediterranean has closed, despite freight remaining low, said trading sources.
The discount of Urals CIF Rotterdam cargoes to Urals CIF Augusta cargoes has narrowed to 44.5 cents/b, drastically smaller than the discount of $1.46/b at the beginning of October. The spread between the two markets has steadily narrowed over the course of the past two weeks.
“The arb is shrinking — it doesn’t work now when you have the North at around $1.90/b,” said a third trader.
A discount of at least 80 cents/b for CIF Rotterdam cargoes is typically required for the arbitrage route to work, also taking into account freight.
Source: PlattsPrevious Next