Kazakh KEBCO oil premiums to Russian Urals oil fell amid low demand from oil refiners in Europe who are cautious about rising scrutiny on oil shipments from Russian ports, three trading sources said.
The development shows how wide ranging Russian sanctions are embroiling other producers affecting even companies from the United States and the EU, which are extracting oil in Kazakhstan.
In early November, the United States imposed sanctions on two ship-owners transporting Russian oil priced above the Western ceiling of $60 per barrel raising caution amid EU players.
Kazakhstan, that rely on Russian ports for most of its oil exports, back in 2022 changed the name for its oil transiting through the Transneft pipelines to KEBCO to separate its oil from Urals.
Many western companies such as Chevron, ExxonMobil, Italy’s Eni and France’s Total hold large stakes in oil and gas projects in Kazakhstan.
In terms of quality, KEBCO is the same as Urals, while the origin of this oil is Kazakhstan. Prior to Russia’s invasion of Ukraine, which Moscow calls special military operation, Kazakh oil traded in line with the price level of Urals and did not have a separate name.
The United States and the European Union previously clarified that oil from third countries being transited through Russia are not subject to sanctions. However, many EU refiners are showing extra caution and refrain from buying any oil loading from Russian ports.
KEBCO is currently shipped from Russia’s Black Sea’s Novorossiisk and Baltic Ust-Luga ports and via Druzhba pipeline northern leg to Germany.
The premium for KEBCO oil to Urals on a CIF MED basis for deliveries to Italy and Turkey decreased in October to just $1.3 per barrel from $16.7 per barrel in January 2023, according to Reuters monitoring.
KEBCO discount to dated Brent declined less dramatically to $12.6 per barrel by October from $9.9 per barrel in January, as price level for Urals oil has been improving since the start of the year amid good demand in Asia.
European refiners are not willing to pay high prices for oil shipped from Russian ports amid logistical issues, requirements to prove non-Russian origin of oil and the clearing of payments.
Many EU companies have introduced restrictions on vessels that have entered Russian ports in previous months, which is also an issue, the sources said.
Turkey, Italy and Romania remain the main buyers of KEBCO oil.
KEBCO is supplied to Romania for the Rompetrol Rafinare refinery owned by KazMunaiGas (KMG), the remaining volumes are sold on the market to various refiners.
Source: Reuters