Urals Crude Price Spread in Europe Widens to Most in Eight Years

The spread between benchmark Russian Urals crude in northwest Europe and the Mediterranean has widened to the most in more than eight years, according to data compiled by Bloomberg.

Urals loading from the Mediterranean is $1.52 a barrel higher than in northwest Europe, the data show. That’s the biggest premium since Dec. 31, 2004.

Daily exports of the grade out of the Black Sea port of Novorossiysk dropped in April by 6.6 percent to 755,601 barrels while loadings from the Baltic port of Primorsk rose 23 percent to 1.39 million barrels, according to shipping schedules obtained by Bloomberg News.

The wide difference in price between the two regions would normally open up the opportunity to send crude from northwest Europe to the Mediterranean. Due to a lack of available Aframax tankers that monopolize this route this flow is not taking place, analysts at Vienna-based JBC Energy GmbH said.

“The apparent shortage of Aframax vessels has blown out freight costs in the north, grinding arbitrage flows to a halt,” the researcher said in a report on April 15. “Urals prices in the Mediterranean have been fetching higher values than cargoes in the North on the back of lower absolute loadings, as well as ongoing sanctions on some 850,000 barrels a day of Iranian and Syrian export barrels.”

JBC expects the price gap to collapse as more tankers become available, which will probably happen once trading moves to cargoes for loading in May.

Iran’s crude exports declined in March to the lowest this year as weaker global demand and international sanctions aimed at the Gulf state’s nuclear program cut purchases, the International Energy Agency said in a report on April 11.

An Aframax tanker can carry 80,000 to 100,000 metric tons of Urals crude.

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