Russian February domestic crude prices surge on firmer Brent, weaker ruble

Spot prices for Russian crude oil for domestic loading and delivery by pipeline and rail in February surged on the month due to a combination of stronger Brent futures and a weaker ruble.

ICE Brent futures were around $89/b when trading of domestic crude started around Jan. 20, and although they subsequently dropped to $85/b, they rebounded to $90/b during the week started Jan. 24. Brent was around $73-$76/b when trading of January barrels took place.

The higher Brent market pushed up export netbacks, which was partly offset by a marginally higher export duty.

The export duty on Russian crude for February was set at $47.70/mt, up from $46.70/mt for January.

Also pushing up netbacks, which the Russian market uses as an indication of value, was a weaker ruble.

Trading of West Siberian crude for processing in February was heard done at Rb50,000-52,000/mt, compared with January levels of around Rb39,000/mt.

Rosneft had not awarded its monthly Udmurtia tender, sources said, which has traditionally been used as a gage for domestic crude trading -- although market participants have increasingly turned to export netbacks for indications.

Turning to export-oriented Varandey crude, this traded at Rb53,550/mt with 37,500/mt changing hands on the St. Petersburg exchange. Last month it traded at Rb45,200/mt with 20,000 mt changing hands.

Demand was had been hit by the sharply higher prices, market sources said, with refineries looking to reduce throughput. Some were opting to cut runs by around 30% and others could follow, as prices hit record highs.

Prices for railcar crude, predominantly shipped to smaller refineries, were up Rb7,000/mt on the month for February volumes, with the smaller increase compared to pipeline volumes attributed to unfavorable refinery economics.

Traders suggested there could be a surplus of crude in February as refiners shunned surging prices. However, those who predominantly export products could benefit from the stronger prices, said sources.