Increase in discount – a consequence of heightened sanctions risks at the end of October when the US imposed restrictions on two of the largest Russian oil companies.
Overall, this is a norm for the oil market: the discount of Urals to Brent increases in the first weeks and months following the tightening of sanctions. This was evident, for example, in the second quarter of 2022, when, in light of the EU’s decision to impose an embargo on maritime oil supplies from Russia, the discount temporarily exceeded $30 per barrel.
ESPO oil has physical and chemical characteristics more similar to Brent and other low-sulfur grades, so even before 2022, ESPO oil was usually sold on the spot market at a premium to Urals.
Experience shows that investors gradually acclimatize to the new level of sanctions risks; therefore, the discount will begin to diminish no later than the beginning of 2026.
Source:
Vedomosti
