MOSCOW, January 10. /TASS/. Russia needs to create a national price agency and develop its transportation system to reduce the Russian oil discount, experts questioned by TASS say.
The discount for the Urals blend increased at the year-start because of more complex logistics and would go down as new chains of supply evolve, they note. "The price difference between the Urals and the Brent expanded over the month from $28 a barrel on December 1 to $38 a barrel on January 5. Such a significant price spread widening is explained by growing freight and insurance costs in conditions of the EU embargo on Russian oil purchases imposed on December 5, which results in greater logistical costs of Russian oil supplies," Alexander Potavin from Finam says. One more cause of the gap in oil prices is in methodology of main taxes and duties calculation in the Russian oil and gas sector - they somewhat differ from actual export prices, he noted.
The Urals oil price on a CIF basis was about $52.5 a barrel in early January, Potavin said. "Russian oil companies believe nevertheless that such huge oil price discount is unstable because it is associated with supply chains’ reformatting. as soon as new logistical chains are formed, the Urals discount against the Brent is expected to contract to $15-20 per barrel," he noted.
The Urals discount in absolute terms is slightly higher than in March - April 2022 but it increased in relative terms due to the Brent prices drop, head of the Center of Energy Development Kirill Melnikov said. The discount of $40 a barrel reflects deals made in December after the EU embargo took effect and it is higher in Baltic ports because ice class tankers are needed for the current weather and their pool is not too large, he noted. "A quick discount reduction is possible in case Russian production and exports go down significantly; otherwise it will start declining only closer to spring," Melnikov added.
Russia needs to create its ecosystem of marine transportation and a national price agency, InfoTEK expert and deputy head of the Institute of National Energy Alexander Frolov said. The Russian system of transportation must comprise provision of services from insurance and finding to construction of oil tankers, the expert said. "The second class of measures to be taken is measures of tactical nature, pertaining to creation of a Russian price agency, taking Argus as an example. We have specialists able to do this," Frolov added.