2nd UPDATE: Ust-Luga Start Seen Keeping Russia Urals Oil Prices Low
March 15 2012 - 9:44AM
Dow Jones News
The start of exports from Russia's new Baltic oil terminal,
Ust-Luga, in March will maintain pressure on the price of Urals
crude oil, already trading at its lowest this year, traders said
Thursday.
Weak refining margins and high prices have deterred buyers of
Urals crude this month and sent the price plummeting to a discount
of $2.75 to the Brent benchmark this week.
Now the prospect of additional supply in March is likely to keep
prices under pressure, traders said, though they added that
improving refining margins could also lend some support.
Urals is seen as a good replacement for Iranian crude, so lower
prices will come as a relief to European refiners worried about
buying alternative crudes once the European Union's embargo on the
Islamic Republic kicks in July.
Two test cargoes are due to load from Ust-Luga at the end of
March, a spokesman for state oil pipeline operator OAO Transneft
(TRNFP.RS) said.
"If the first loading goes well--as expected--a second test
loading will start several days later," he said.
Russian oil company Surgutneftgaz JSC (SGTZY) issued a tender to
sell the first cargo, 100,000 metric tons of Urals crude scheduled
to load on March 21-22.
The tender was met by skepticism from traders after a similar
offer last month was rescinded.
"I feel like I've seen these headlines every month since
November," said one trader.
"We will see if it actually loads," he added.
However, the signs were positive as shipbrokers said interest in
chartering ships out of Ust-Luga has grown.
Royal Dutch Shell PLC (RDSA) has chartered the Seamagic tanker
to load 100,000 tons of crude from Ust Luga on March 21, shipping
fixtures showed. The fixtures also showed several fuel oil cargoes
scheduled to load in March.
The start of operations at Ust Luga were delayed due to the
collapse of a berth in November, which led to extended maintenance
and forced the start date to be pushed back several times.
The terminal is set to handle around 400,000 barrels a day,
shipped via the Baltic Pipeline System. The pipeline redirects
Russian oil to the Baltic Sea from the Druzhba pipeline system that
goes through Belarus to the EU.
-By Sarah Kent and Konstantin Rozhnov, Dow Jones
Newswires;4420-7842-9376; sarah.kent@dowjones.com
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