Extra OPEC barrels in Europe weigh on Russian crude oil trade

A rapid flow of oil to southern Europe from OPEC Countries has softened prices for Russian medium sour crude this week, traders said Wednesday.

The European physical oil market for medium sour crude is diverging. The Russian Urals crude values in northwest Europe have struck an all-time high of 10 cents premium over the North Sea benchmark, while values in the Mediterranean have sunk.

In the south, the Urals grade crude is coming under pressure from an influx of Middle Eastern crude and lower cracking margins, which means the grade was last valued at a discount of around 65 cents against the North Sea benchmark.

Traders said this split could possibly allow for inter-regional arbitrage, with some Urals cargoes from the south moving to refiners in northwest Europe. However, Forties may prove to be a more popular grade with refiners in northern Europe, and may see oil companies releasing barrels from storage.

There are thought to be five fully loaded tankers of Forties crude being used as floatingstorage in Europe, with another one likely to load in coming days.