Russian oil exports under fire as Iraq slashes prices

The price of Russia’s flagship Urals grade slumped this week as Russian supply and exports are set to grow and as Iraq cuts the price of its crude for Europe. On Tuesday, the Urals grade from the Baltic Sea was offered at a discount of $2.35 per barrel to Dated Brent, Bloomberg reports, citing the price-discovery window hosted by S&P Global Platts. While the discount to Brent is typical for the Urals grade, this week’s discount is much deeper than the $1.05 a barrel discount at which the Russian flagship crude was offered last week, Oil Prices writes.

One of the key reasons for weaker prices of Urals, according to Bloomberg, is the expectation of rising supply out of Russia, which is pumping more oil under its higher OPEC+ quota and which is preparing to export more barrels next month.

So far in September, Russia’s crude oil and condensate production has been higher by 2.4 percent compared to August, according to data from the Russian energy ministry seen by Bloomberg. The other reason for the weakening price differentials of Russia’s Urals is somewhat unexpected competition from Iraq, which has cut its prices for the United States and Europe (except the Mediterranean), in a rare divergence from the pricing of the top exporter from the Middle East and the world’s largest crude exporter, Saudi Arabia. Iraq’s lower crude prices in Europe for October are competing with Russian Urals supply, among others.

Last week, tighter supply of U.S. medium sour crudes in the aftermath of Hurricane Ida pushed the price of Russia’s Urals up to a discount of just $1.05 per barrel to Dated Brent—the highest price for Urals in seven months—compared to a Urals discount to Brent of $1.95 a barrel before Ida, Bloomberg estimates showed. In the days following Hurricane Ida, there was increased interest from refiners for Russian crude, especially the medium sour Urals, which is similar to the U.S. Mars blend whose production was still offline, according to Bloomberg’s sources.