Russian Urals oil has become slightly more expensive than Brent

Oil of the Russian grade Urals, which is usually traded at a discount to the benchmark Brent, on Friday, April 24, became more expensive: the cost of Urals increased by $0.68 to $16.39 per barrel for deliveries to Northwestern Europe. The premium to the benchmark was $0.20 per barrel.

According to the May shipment program, Urals exports from the Baltic ports should be reduced by almost 40% compared to April, to the lowest level since December 2014 - up to 997,000 barrels per day. Supplies from Russia are declining due to the entry into force of a new OPEC + agreement to limit production, writes Argus.

As background Victor Parno, vice president of Argus, explains, among the reasons that the market began to raise the price of Urals is that the coronavirus hit light oil the most (this includes Brent, Forties, Oseberg, Ecofisk and Troll), as against the During the pandemic, global demand fell especially hard for gasoline. Urals does not feel so bad, among other things, because the output of a diesel engine that is now more in demand from heavy grades is higher than from light grades.

The price of Urals is extremely important for the Russian budget: if the Russian variety costs $15 per barrel, the liquid reserves of the National Wealth Fund could be exhausted in just over two years, Deutsche Bank economists calculated. The 2020 budget was balanced at $50 per barrel of Urals. If we assume that Urals prices in the next two months will be $10-15 per barrel, the budget may lose 780-860 billion rubles in these two months alone.