LONDON: Spot differentials for Russian medium sour Urals plunged to 10-month low in the Mediterranean on Friday, after falling nearly $1 a barrel in just two days, an unexpectedly large move, traders said.
Demand has been weighed down by poor margins for the last few months and there is little sign of improvement.
Refining margins for gasoil and diesel, in particular, have been unusually weak for this period owing to mild winter in Europe.
"Demand is not great despite the lower export programme," one trader said, "Must also be because some Europeans did take South American grades for January arrival displacing some demand.
Even Kirkuk and Basra Light are having difficulty being placed."
In the Platts window, Tenergy sold an 80,000 tonne Urals cargo to Total at dated Brent minus $1.35 cif Augusta loading Jan 22-26.
One trader added that ample quantities of Kazakh CPC Blend, a borderline sour grade, have helped put a cap on prices. The differential for this grade also fell sharply.
Exports of Kazakh CPC Blend crude oil have been set at 2.826 million tonnes in February, up from the initial January programme of 2.733 million tonnes, a preliminary programme showed on Friday.
Three cargoes were added late to the January programme at the start of this month, putting pressure on prices for the grade.
In tender news, Turkey's Tupras awarded a buy tender for Urals for Jan. 25 to Feb. 5 arrival, with traders pointing to Vitol as the winner but this could not be confirmed.
Iran could find itself with another big buyer of its crude oil after details of a potential deal with Russia emerged.
Iran and Russia are negotiating an oil-for-goods swap worth $1.5 billion a month that would let Iran lift oil exports substantially, undermining Western sanctions that helped persuade Tehran in November to agree a preliminary deal to curb its nuclear programme.
Russian and Iranian sources close to the barter negotiations said final details were in discussion for a deal that would see Moscow buy up to 500,000 barrels a day of Iranian oil in exchange for Russian equipment and goods.
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