Sail to America

Futures for Russian oil will be quoted in New York this year

This year, the New York Mercantile Exchange (NYMEX) is going to launch trading in futures contracts for the Russian oil blend REBCO (Russian export blend crude oil) - as Urals will be called in America. As NYMEX Executive Director James Oliver told Interfax yesterday, trading will be conducted electronically on FOB (free on board) terms with delivery at the port of Primorsk. The volume of delivery will be 730 thousand barrels (100 thousand tons) - this is how much oil is transported by one tanker from Primorsk.

Discussions about the need to launch REBCO futures trading on NYMEX to increase the price of Russian oil have been going on for a long time. However, after last summer Vladimir Putin “drew the attention” of the government to the too large and “not very fair” price gap between the Russian Urals mixture and the North Sea standard Brent oil (then the discount reached about 4.5-6 dollars per barrel ), negotiations on this issue have intensified. Already in November last year NYMEX Holdings Inc. and Expertica Ltd group of companies announced their intention to launch REBCO futures contracts on NYMEX Europe Limited in London. As the companies noted then, the contracts will be based on real transactions for oil supplied from Russia. At the same time, it was planned to create a company, Russian Energy Futures Ltd, which was supposed to promote futures contracts for Russian oil.

Mr. Oliver's announcement yesterday surprised Russian analysts. “This is strange, we expected the start of trading no earlier than 2008,” notes Ekaterina Kravchenko from BrokerCreditService Investment Company. According to her, it is not clear why trading will be on FOB terms, and not the more common CIF (cost, insurance, freight), it is unknown what the conditions for oil transportation will be, and so on. Therefore, Ms. Kravchenko believes that we are talking, rather, about trial auctions in which these mechanisms will be tested. “So far, no agreements have been reached on actual supply volumes, which means that these will most likely be some kind of declarative trading in futures,” says Denis Borisov from Solid Investment Company. - To move on to real trading, it is first necessary to convince oil workers and traders to abandon direct contracts for oil supplies and switch to exchange mechanisms. So full-fledged trading could begin in about two or three years,” the analyst believes. In addition, Ms. Kravchenko notes, when concluding the contracts that Mr. Oliver is talking about, the real price for this type of oil is not reflected. “To determine the real relationship between supply and demand, it is necessary that at least 15-20% of the goods are traded on the market, so for now the trades will only reflect a speculative price,” she explains.

Mr. Oliver also could not say anything specific about who and how will supply oil under the new contracts. He only noted that NYMEX is still negotiating with the Russian government to ensure actual volumes of oil for trading. But at the same time, he expressed hope that trading in REBCO futures would attract the attention of large Russian oil producers, if only because NYMEX is a global trading platform.

Anna GORSHKOVA