An oil drilling rig near Almetyevsk, Tatarstan, Russia.
Photographer: Andrey Rudakov/Bloomberg
U.S. President Donald Trump’s sanctions against Iran and Venezuela have inadvertently increased demand for a Russian brand of crude oil. The sanctions added to a jump in demand for Russian crude in the wake of output cuts from the OPEC member countries and their partners.
The U.S. announced sanctions against Venezuela in late January and removed the remaining waivers for buyers of Iranian oil from May. The measure created a shortage of the heavy, sour kind of crude that the two export, a variety similar to that produced in Russia.
Urals has traditionally traded at a discount to Brent. Over the past five years, a barrel of the Russian crude was on average $1 cheaper than the benchmark in the Mediterranean and $1.63 cheaper than in Northwest Europe.
The discount shrank last November after Trump restricted global purchases of Iranian oil. Since the beginning of 2019 the Urals discount to Brent in Northwest Europe has regularly turned into a premium of as much as $0.86 per barrel. In the Mediterranean region, a traditional domain of Iranian oil, the premium has at times grown to more than $1 per barrel.