There is speculation that Russia may further cut overseas supplies of its Urals oil next month, as there is a rising demand from domestic refineries due to the easing of coronavirus-related restrictions.
This is also expected to increase the appetite for the crude from processing plants. Russia agreed to reduce its oil production in May through to July by almost 2.5 million barrels per day of as a part of a deal with OPEC+, to combat the economic fallout caused by the coronavirus.
But Moscow lifted its coronavirus lockdown this week. A major Russian oil company said: “Demand for gasoline is ramping up fast, we have to increase runs or there will be nothing to supply to our petrol stations.”
Exports of Russia’s flagship Urals oil blend in June have been set to decline to the lowest in months, to just 4.4 million tonnes from the Baltic ports and 1.2 million tonnes from the Black Sea’s Novorossiisk.
Traders familiar with Russian oil companies’ export plans expect oil loadings from the Baltic Sea ports to decline further next month to roughly 3 million tonnes.
Low supplies of Urals oil has driven the premium for the grade to dated Brent to historic highs in early June – plus $1.95 and $1.80 per barrel due to a lack of alternatives in Europe.
It means oil companies will have roughly 1.4 million tonnes less oil for export, traders said. An increase in gasoline demand in June has been above expectations so far, which may lead to even more supplies going to domestic refineries, they added.
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