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The price of Russia’s flagship crude grade, Urals, continues to average below the $60 per barrel price cap set by the G7, but a large difference in export and import prices suggests that the actual trade in Russian crude is murkier than it seems at first glance.
The price cap on Russian crude imposed by the EU, the G7, and Australia came into effect on December 5. Under it, buyers paying $60 or less per barrel of Russia’s crude will have full access to all EU and G7 insurance and financing services associated with transporting Russian crude to non-EU countries.
The price of Urals last year plummeted relative to the Dated Brent benchmark when talk of a price cap first emerged. The discount of Urals to Brent has been $20 per barrel or more since late last year.
The official Urals price is below the price cap of $60 per barrel, and has averaged $52 a barrel at Russia’s Baltic Sea port of Primorsk so far in June, according to Argus data reported by Bloomberg.
However, the trade involving Urals is not clear-cut as it looks. There is a gap between the export price in Russia and the import price in India, according to Bloomberg’s analysis. If multiplied by volumes, the gap of $12 per barrel so far this month suggests that shipbrokers, traders, and vessel owners could be receiving a total of $900 million per month for the handling of Russian crude oil, Bloomberg notes.
Earlier this year, traders said that Russian exporters were offering $15-$20 per barrel discounts, and they were also paying $15-$20 per barrel to shipping companies to transport the crude to Asia. The business of transporting Russian crude oil to Asia has become “crazy good,” a trader dealing with Russian oil told Reuters in February.
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com