MRC -- Russian Deputy Prime Minister Alexander Novak is confident that the oil market will calm down and the discount on Russian oil to the Brent benchmark will decrease again, said Interfax.
"We have already had two such surges in discount growth, in 2022 and then at the beginning of 2023. This is of course currently associated with the sanctions package imposed at the end of last year. This is a natural market reaction to insure the risks. I am sure that as the chains improve and the market calms down, the discount will decrease," Novak told reporters.
Argus data reviewed by Interfax shows that, for 30 days in January, the discount on Urals oil in the port of Primorsk (FOB) was USD18.38 per barrel to Brent compared to USD18.22 per barrel in December. The price of Urals in Primorsk in January increased to USD61.77 per barrel from USD59.6 per barrel in December 2023.
The highest discount last year was USD40.05 per barrel (FOB Primorsk) in January, when sanctions on the purchase of Russian oil came into full effect, while the lowest was in September, at USD13.71 per barrel, when Russia and Saudi Arabia announced an extension their cuts in production and exports, respectively, until the end of the year amid expectations of an oil deficit in Q4.
In the summer of 2023, the price of Russian oil exceeded the price cap established by the G7 countries, which did not allow their companies to transport Russian oil, and therefore discussions began about lowering the ceiling. However, the G7 countries decided to tighten control over compliance with sanctions and issued appropriate clarifications in the fall and the US Treasury imposed sanctions on several tankers and ship owners in November. In October, the discount was USD13.73 per barrel, and in November, it grew to almost USD16 per barrel.
Discounts for Urals oil in the port of Novorossiysk are traditionally slightly lower, at USD17.9 in January 2024 versus USD18 per barrel in December 2023, while the price in January was USD62.2/bbl in January versus USD59.6/bbl in December. Thus, the average price of Urals for 30 days in January was almost USD62 per barrel, which is 3.8% higher than in December, while Brent (North Sea Dated) increased by 3%.
Argus data show that the cost of Russian Urals in Indian ports (DAP West Coast India) in January 2024 increased to USD76.36 per barrel from almost USD74 per barrel in December, and the discount to Brent decreased slightly from USD3.87 per barrel in December to USD3.79 per barrel in January.
The price of another grade of Russian oil, ESPO, sold from the eastern port of Kozmino, increased in January to USD73.4 per barrel, compared with USD72.2 per barrel in December, and the discount decreased from USD5/bbl. to USD4.46 per barrel in January 2024.
The Urals price for calculating taxes as of January 2024 is selected from the highest of two - Brent with a certain discount (USD15 per barrel, set forecast) or the Urals quote in Russian ports + the cost of transport to European ports. The cost of transport is set according to the Federal Antimonopoly Service method (to use Argus data, but the method has not yet been approved), and if it is not available, then USD2 per barrel.
We remind, Imports of polymer feedstock to Russia may grow in 2024, Petr Bazunov, General Director of the Russian Plastics Processors Association (RPPA). A number of processors in our Association have decided to increase imports, as imported raw materials in Russia are sold at prices equal or close to those of SIBUR. The principle of import parity or so-called netbacks is in effect. Refiners choose the raw materials that are more profitable for them. No one is holding on to SIBUR because in quality of production - due to failures with American catalysts - and in the terms of purchase SIBUR is no better than imports, and often turns out to be worse.