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June 19, 2019

Russian oil brand Urals will be exported through stock trades

Russian oil brand UralsRussian oil brand Urals will soon be exported abroad through stock trades, after decision by the Federal Customs Service. The resolution comes in response to an inquiry from the International Stock Exchange in St Petersburg. So far, exports have been done through agreements between supplier and recipient at pre-agreed prices.

Now the stock exchange trading with oil brand Urals, which has been going on since November last year, could turn into physical supplies of Russian oil abroad. As the volume of main consumption is in Europe, the stock exchange is in the process of negotiating a contract with Chinese market participants.

Currently, in the negotiations between the supplier and the buyer, the price is set at the price of a bilateral contract, unlike the Brent oil brand, while is based on quotations on international exchanges.

After the release of futures on Urals on November 26, 2016, the stock exchange price for Russian commodity was available at the St Petersburg Stock Exchange. However, there are still no real cross-border deliveries, including the uncertainty about the paying the duty for such transactions.

The conditions created for international stock trading suggest that buyers from abroad will come. This will cut the gap between Brent and Urals from the current 5-7 percentage points to 3-4 percentage points. The lower price of Urals is due to the unstable quality and high share of sulfur impurities. Significant are the inconveniences in the conclusion of transactions and the lack of developed stock exchange trading.

The St Petersburg Stock Exchange is negotiating with the Shanghai Petroleum and Natural Gas Exchange to jointly develop futures on Urals.

Urals’ price is unlikely to change, according to local experts. Mainly, the sales are within long-term contracts between large counterparties, and a small portion of stock deals. According to the analysts, to make Russian oil market transactions a real market factor, Russia should become an international financial center comparable to London and New York.

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