European Refineries Cut Oil Purchase from Urals amid Rising Prices

The rapidly rising price of Russia’s flagship Urals blend oil has forced European refineries to cut purchases from Moscow and look for crude supplies elsewhere, traders said on Friday, Reuters reported.

Urals, a blend of heavy sour oil from the Urals mountains and Volga river region and light oil from Western Siberian fields, has traded at a hefty premium of more than $2 per barrel to dated Brent — a global benchmark — since April, up from a discount of around $4 per barrel.

Prices are being pushed up as a global deal to cut oil output reduces the amount of Urals for export, with loadings from Russia’s Baltic ports set to fall to 2.5 million tonnes in July from the 4.4 million tonnes planned for June.

Complex refineries in southern Europe have sustained loses from using Urals in the past few months, with the shortfall topping $3 per barrel in the last two weeks.

While the Russian blend remains popular in China due to a lack of sour barrels from Saudi Arabia and other destinations, Europe has a range of alternatives, including oil from the United States and Norway, although not in great enough volumes to totally replace Urals.

“The oil refineries are not buying Urals at current prices, while light blends are feeling great… There is plenty of WTI in Europe,” a trader said, referring to U.S. West Texas Intermediate crude.

“Johan Sverdrup oil for delivery in July has sold out,” he added, noting oil from the Norwegian field was a good substitute for Russian barrels amid a scarcity of available alternatives.

Another source at a global trading firm said that the European refineries were already using more light oil from West Africa and the United States instead of Urals.

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