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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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European Refiners Could Ditch Poor Quality Russian Crude

While Russia is sending its top-quality crude oil to China in its battle for market share on the prized Asian market, European refiners are left with lower-quality imports from Russia and are now reviewing how much Russian crude they would buy and at what price, Reuters reported on Monday, citing traders and sources close to European refiners.

The quality of Russia’s Urals crude grade has deteriorated so much that some refiners are considering renegotiation of supplies and prices.

The Urals grade exported to Europe is a blend of different oils, and that blending is taking place inside the pipeline system in Russia. According to data from industry sources obtained by Reuters, the quality of the Urals blend that is being exported to Europe in February is near the bottom of the standard range set by the Russian standards agency Rosstandart.

“We can’t refine this (oil),” a trader at a European company told Reuters. “There is only one way out, which is to cut Urals purchases and get supplies of lighter grades for blending,” the trader added.

As early as in November 2017, Russian national pipeline monopoly Transneft said that the sulfur content of Urals oil exports to Europe would reach a critical level in 2017 and continue to rise in 2018 as more low-sulfur crude oil is shipped to China. The vice president of Transneft, Sergey Andronov, said the company had no technological capacity to continue reducing the sulfur level of Urals crude for European buyers as low-sulfur Urals exports to China continue to grow. Related: Dutch Gas Goals Rocked By Earthquakes

The national standard requires a level below 1.8 percent for sulfur, but according to trading sources who spoke to Reuters, the Urals for Europe has often exceeded the allowed level recently. This could prompt European refiners to either seek to cut Russian oil purchases or renegotiate the prices down.

Meanwhile, Russia held its top oil supplier spot to the Chinese market in December for a tenth month running, and was the largest supplier to China for the entire 2017—outstripping Saudi Arabia for a second year in a row.

By Tsvetana Paraskova for Oilprice.com

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