What is urals crude oil?
Urals crude oil is a Russian export blend of heavy sour crude oils from the Ural Mountains region. The blend is similar to the OPEC basket of crudes, but with a higher sulfur content. Urals crude oil is used as a pricing benchmark for other crudes and petroleum products in Europe and Asia. The Urals oil is the reference oil brand used as the price benchmark for the vast majority of Russian oil exports. It is a blend of the Urals and Volga regions’ heavy and sour oil with the corresponding light oils from Western Siberia.
Russia is the world’s largest producer of crude oil, and Urals crude oil makes up a significant portion of Russia’s total production. In 2019, Russia produced an average of 11.21 million barrels per day (bpd) of crude oil, with Urals accounting for approximately 7-8% of that total.
Urals crude has been exported from Russia since the early 1990s, and it continues to be one of the country’s most important export commodities.
Urals Brent price difference
Urals crude prices are based primarily on a discount to Dated Brent crude oil prices. Since the quality of crude oil Urals is lower, production costs are therefore cheaper. Around April 2022 the discount to Brent was almost -$40, causing the Asian buyers to purchase this grade at hostirically low rates due to the sanction.
Urals vs Dated Brent spreads are available on exchanges such as CME and you can find the full specification here
Where is Russian oil going?
As Russia’s oil production continues to grow, the question of where all that oil is going becomes increasingly relevant. While some of it is obviously being used by Russia itself, a significant portion is being exported to other countries. So where is Russian oil going?
It’s clear that Russian oil is flowing to both Europe and Asia, but it’s difficult to say exactly how much is going to each region. What is certain is that Russia has become an important player in the global oil market and its exports are likely to continue growing in the future.
Since the early 2000s, Russia has been a major player in the global oil market. And while Russia’s oil production has fluctuated in recent years, it still remains a significant source of energy for many countries, as the world is realising with the recent events in Ukraine causing commodity prices to rise higher than ever.
A large part of Russian oil exports used to go to Europe (before the EU embargo), which is not surprising given the close proximity between the two continents. In fact, Russia has been one of the top suppliers of oil to European countries for many countries. However, Russia has also been exporting increasing amounts of oil to Asia, particularly China. Since the oil embargo almost all exports are now going to Asia with China and India saving billions buying cheap crude oil that Europe and US no longer want to accept.
As of September 2022, China accounts for more than half Russia’s seaborne oil exports. Russia has now become China’s largest supplier, surpassing Saudi Arabia. In March of this year, oil imports by China and India from Russia exceeded those from the 27 member states of the European Union combined.