Russian Urals crude hits steepest discounts since April 2023 as Middle East supply returns

In brief

• Urals crude is being sold at discounts of up to $33 a barrel at Baltic and Novorossiysk ports, the widest since April 2023.
• Weaker Indian demand and high freight costs are cited as the main reasons.
• Export volumes have held steady, and October revenue from crude exports rose 19 percent.

Discounts widen at Baltic and Black Sea ports

Urals cargoes loaded at Baltic ports and at Novorossiysk were offered with discounts of up to $33 a barrel in the first week of November, the highest level since April 2023, according to Moscow Times reporting (Росія змушена продавати нафту з рекордними за три роки знижками: у чому причина, - ЗМІ – UNIAN). Analysts cited by Kommersant put the discount at Primorsk and Ust-Luga at $31 a barrel and at Novorossiysk at $33 by November 6, both wider than a week earlier (Скидки на российскую нефть достигли максимума с 2023 года. В октябре доходы от ее экспорта выросли на 19% – The Insider).

The price of Urals loaded at Baltic ports fell by $24.73 to $65.63 a barrel over the same week, while the Novorossiysk price dropped by $23.93 to $63.63.

Demand and freight costs

Analysts link the wider discounts to weaker demand for Russian crude and high shipping costs. Freight rates have eased slightly, but moving cargoes from Russian ports to Asia remains expensive, with the cost of shipping 100,000-tonne lots from Primorsk to India and China estimated at $28.60 to $32.70 a barrel.

India has reduced its purchases of Russian oil as supplies from the Persian Gulf have resumed. Urals delivered to India's west coast fell by $2.30 for December delivery to $94.38 a barrel, and for the first time since August the grade is selling below the benchmark. Reports say Indian buyers had previously paid a premium for Russian crude (Дисконты на российскую нефть вернулись на уровень 2023 года – Reform.news).

Export volumes and revenue

Despite the deeper discounts, export volumes have barely changed. Shipments from Baltic ports held at about 1.5 million barrels a day, or 1.3 million tonnes, the same level as in early October. Revenue from crude exports nonetheless rose 19 percent in October, to 449 million euros a day, the highest since June 2022, according to a study by Finland's Centre for Research on Energy and Clean Air (CREA) published on November 12.

Market position

China remains the one market where Urals still sells above the Brent futures price, according to the reports. Overall, the Urals discount is back to the levels seen in spring 2023.

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