The discount on Russia’s flagship Urals crude oil relative to Brent has surged in recent days, reaching a year-to-date high of $20 per barrel. This spike is attributed to U.S. sanctions against Russian energy giants Rosneft and Lukoil, which have disrupted crude oil flows, according to industry sources cited by Russian newspaper Kommersant on November 12.
Urals crude has consistently traded at a significant discount to Brent since the onset of the Russia-Ukraine conflict, primarily with major buyers like China and India. However, this discount is not fixed and fluctuates based on market conditions.
Last month, U.S. sanctions caused the discount to widen again. As of November 11, Urals crude was trading $19.40 per barrel below Brent on a FOB basis at Russia’s Baltic Sea port of Primorsk and Black Sea port of Novorossiysk, up from $13-$14 per barrel earlier in November, an industry source told Kommersant, citing Argus data.
Before the U.S. sanctions took effect on October 22, the discount stood at approximately $11-$12 per barrel.
This marks the second time this year that the discount on Russian crude has spiked. The previous surge occurred earlier this year when the Urals discount exceeded $15 per barrel following the latest round of Biden administration sanctions imposed in early January.
The largest discount was recorded in 2022 and early 2023, when Urals crude traded more than $30 per barrel below Brent, immediately after the conflict began and the EU imposed a ban on Russian oil imports in 2023.
However, during that period, Brent prices fluctuated between $80 and $120 per barrel, significantly higher than current levels.
The escalating discount will further strain Russia’s oil revenues, the Kremlin’s primary budget source for funding the war in Ukraine. Russian budget revenues in October plummeted by 27% year-on-year, driven by falling international oil prices, intensified sanctions, and a stronger Russian ruble.
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