Dubai/Urals FOB spread widens to $13/b amid price cap clampdown

Quantum Commodity Intelligence – The spread between Russia's flagship Urals crude and the Middle East Dubai benchmark widened sharply during December, as prices for Urals declined faster than major global benchmarks.

Urals export crude averaged $64.23/b in December, according to the Russian Finance Ministry, down $10.61/b from the November average sales price of $74.84/b, or 14%.

The Quantum average price for Dubai was $77.33/b for February-loading barrels versus $83.54/b on January-loading crude, a drop of 7.45%, following declines of nearly 7% and 4% in the previous two months.

This puts the Dubai/Urals spread at $13.10/b on a FOB basis last month versus $8.70/b in November. Last month was the widest spread since August, while as recently as February 2023 the Dubai/Urals delta was above $30/b.

Likewise, the Urals discount to Dated Brent crude widened to around $13.50/b in December from around $8.30/b in the previous month. The ministry used a Dated Brent average price of $77.88/b for its December calculation.

Although the Urals sales price was above the nominal $60/b price cap, the wider gap against other benchmarks could be an indicator that the clampdown on vessel operators and companies flouting the ceiling is having an impact on Russian pricing.

In December, the G7-led coalition that has sanctioned Russia's oil industry said it would step up efforts to enforce existing rules to cut the country's oil revenues and beef up reporting requirements to ensure compliance with the price cap.

This has already impacted Russia's far eastern Sokol crude, with several cargoes unable to discharge in India due to payment issues around the price ceiling and broader sanctions.