Differentials for Urals in NWE rose Wednesday to their highest level since December 2011 on the back of strong buying demand and growing market tightness.
Urals NWE cargoes CIF Rotterdam was assessed at Dated Brent plus $0.30/b, rising $0.11/b on the day. This was the highest level since December 15, when Urals NWE was assessed at Dated Brent plus $0.35/b.
Market tightness, across the whole program in Novorossiisk and across the middle decade of the Urals program in Primorsk, was named as the cause of the strengthening values. A trader said Wednesday: "The only reason for Urals being so strong is that the program is very tight in the second decade."
Some traders, however, saw the potential for values to weaken as the second decade of August moved out of the Platts assessment window of 10-25 days forward.
One trader said Wednesday: "Things will certainly weaken once the second decade moves out of the trading window. Cracks are no so impressive, and I would expect Urals NWE to become negative quite soon."
Another trader said: "I'm not sure when Urals is likely to correct. The third decade looks longer in the north, but the Mediterranean still looks very short. I was hearing above Dated Brent plus $0.30/b trading in NWE."
Urals differentials in the Mediterranean also strengthened on the day, rising above Urals NWE to Dated Brent plus $0.35/b, although they remained well below their recent high of Dated Brent plus $0.675/b seem on July 16.
As in the north, a tight program was cited as the reason, although a lack of competing Kirkuk cargoes was also seen as a factor.
One trader said: "There is a lack of [alternative] barrels from Iraq at the moment. This means that the Mediterranean should keep on being higher than Urals in NWE."
Another trader said the reason for stronger differentials was: "Kirkuk, [Urals] pipeline [deliveries are] short, margins are still good, and sweet is not as cheap as it was. There's not much Basrah either."
