The Northwest European Urals market has dropped heavily in European trading this week, breaking out of the narrow trading band that defined much of the third quarter, and falling to a more than five-and-a-half-month low.
On Thursday, Platts assessed Aframax cargoes of Urals, basis CIF Rotterdam, at a $1.89/b discount to the Mediterranean Dated Strip, their lowest relative to the 13-28 day forward Dated Brent curve since April 13. CIF Rotterdam Urals cargoes have dropped 34 cents/barrel so far this week.
Market sources said that there are still anywhere between 20 and 25 Urals cargoes left to sell out of the Baltic Sea program in October with limited outlet outside of the region.
"There are still too many cargoes, and the arb isn't really open [to the Mediterranean]," a trading source said, adding that the lack of a steady flow from Northwest Europe south has kept more volume concentrated in the CIF Rotterdam market throughout this trading cycle.
Differentials in the CIF Augusta Urals market came under substantial pressure early on the October trading cycle, after the loading program from the Black Sea port of Novorossiisk, at 594,726 b/d, proved to be the highest since January.
The longer schedule, and subsequently lower differential market, has largely closed the standard arbitrage route between the CIF Rotterdam and CIF Augusta markets which usually helps clear the comparatively longer Baltic Sea schedule.
"There is still the Baltic demand, but the arb is closed to the Mediterranean at the moment and freight has been ticking out. It [the differential] is probably going to have to give some more."
Additionally, scheduled loadings in October from Primorsk and Ust-Luga combined are set to total 6.404 million mt, in the highest Baltic Sea loading program in recent memory.
Furthermore, due to terminal maintenance at Primorsk, exports out of the port are back-ended, with a higher concentration of cargoes in the second half of the schedule.
Consequently, as the trading cycle has rolled forward, Urals cargo availability in the prompt spot market has expanded.
