While Russia is sending its top-quality crude oil to China in its battle for market share on the prized Asian market, European refiners are left with lower-quality imports from Russia and are now reviewing how much Russian crude they would buy and at what price, Reuters reported on February 6, 2018, citing traders and sources close to European refiners.
The quality of Russia’s Urals crude grade has deteriorated so much that some refiners are considering renegotiation of supplies and prices. According to data from industry sources, the quality of the Urals blend that is being exported to Europe in February is near the bottom of the standard range set by the Russian standards agency Rosstandart.
«We can’t refine this (oil),» a trader at a European company told Reuters. «There is only one way out, which is to cut Urals purchases and get supplies of lighter grades for blending,» the trader added.
As early as in November 2017, Russian Transneft said that the sulfur content of Urals oil exports to Europe would reach a critical level in 2017 and continue to rise in 2018 as more low-sulfur crude oil is shipped to China. The vice president of Transneft, Sergey Andronov, said the company had no technological capacity to continue reducing the sulfur level of Urals crude for European buyers as low-sulfur Urals exports to China continue to grow.
The national standard requires a level below 1.8 % for sulfur, but according to trading sources who spoke to Reuters, the Urals for Europe has often exceeded the allowed level recently. This could prompt European refiners to either seek to cut Russian oil purchases or renegotiate the prices down.