Andrea Innocenti Urals crude , Russia's top grade, was offered at the steepest discounts to Brent crude in three years. The decline occurred in early November, as supplies from the Middle East began to pick up again and India reduced its imports from Russia.
Record discounts in the ports of the Baltics and Novorossiysk
Between November 1 and 6, Urals was traded at a price of $31 a barrel lower than Brent crude in Baltic ports and $33 in the Black Sea port of Novorossiysk. According to Argus data, reported by the Kommersant newspaper, these are the widest gaps since . Argus links the widening gap to weak demand and high transportation costs.
Despite the wider discounts, export volumes remained stable. Baltic ports averaged around 1,5 million barrels per day , in line with early October levels. From Novorossiysk, flows remained almost unchanged at 762.000 barrels per day.
The Middle East and India are changing the balance of power
In November, India's crude oil imports through the Strait of Hormuz rose to 2,1 million barrels per day , surpassing the 1,8 million purchased from Russia, according to data from shipping analytics firm Kpler. Kirill Bakhtin, an analyst at BCS World of Investments, notes that rising supplies from Persian Gulf producers are increasing competition for Urals crude.
Sergei Frolov, managing partner at NEFT Research, believes that high transportation costs are making Russian crude less competitive. Russian crude for December delivery to the west coast of India fell $2,30 to $94,38 a barrel , $2,25 below Brent crude . This is the first time since August that Russian crude destined for that region has been priced below Brent.
Analysts at Vector Capital write that Russian oil producers' revenues appear to have peaked. Middle Eastern crude shipments are approaching pre-war levels, which is why they expect lower global prices and even wider discounts on Russian crude, resulting in a decline in export revenues.