Urals Hits Three-Year Low on Discounts: $31-33 to Brent as Persian Gulf Competition Bites

Russian Urals crude traded at its widest discounts to Brent in more than three years in early November: $31 per barrel at Baltic ports and $33 at the Black Sea port of Novorossiysk in the period from November 1 to 6, according to Argus data cited by the Kommersant newspaper. Both discounts were the widest since April 2023.

Argus attributes the widening discounts to weak demand and high freight rates. Export volumes, meanwhile, remained stable: shipments from Baltic ports totaled about 1.5 million bpd - in line with early October - while Novorossiysk shipped 762,000 bpd.

The key pressure factor is the recovery of supplies from the Middle East. India's oil imports through the Strait of Hormuz rose to 2.1 million bpd in November, exceeding the 1.8 million bpd India bought from Russia, according to data from analytics firm Kpler.

BCS World of Investments analyst Kirill Bakhtin told Kommersant that growing supplies from the Persian Gulf are intensifying competition for Urals. NEFT Research managing partner Sergei Frolov noted that high freight costs are reducing the competitiveness of Russian oil.

Russian crude for December delivery to India's west coast fell by $2.30 to $94.38 per barrel, dropping to $2.25 below Brent. This is the first time since August that Russian oil on this route has traded at a discount to Brent.

Analysts at investment firm Vector Capital stated that Russian oil producers' revenues have apparently peaked. In their assessment, Middle East oil supplies are approaching pre-war levels, while falling global prices and widening discounts will cut producers' export revenue.