Russian Urals oil flips to discount as Asian demand ebbs, sources say

Russian Urals crude has flipped to a discount against dated Brent at Indian and Chinese ports as a fall in demand from Asian refiners pressures prices, four trade sources said.

Urals, Russia's flagship oil grade, had traded at a premium to Brent in India and China, its main outlets, since March as the conflict in the Middle East disrupted global oil supplies and boosted demand for cheaper alternatives.

Demand for Russian crude has now fallen, however, the sources said, as Asian refiners have drawn on inventories, found other alternatives and in some cases cut runs.

Urals cargoes for delivery to India in July and August have this month traded at discounts of between $2 and $3 a barrel to dated Brent, compared to a premium of $7 to $8 a barrel in April and May, the sources said.

During the northern hemisphere winter months, Urals fell to discounts of $7 to $8 a barrel when tougher U.S. sanctions reduced Russian oil output. In June to August last year discounts had been around $1 to $3 a barrel.

While the Chinese and Indian markets follow each other closely, reduced buying by China has a broader effect across grades. It buys less Urals than India, but more lighter Russian grades - ESPO Blend, Arctic and Sakhalin crude.

In some cases Chinese buyers have refused to take Russian oil cargoes for June delivery, one source said, making sellers vulnerable in price negotiations as otherwise volumes may end up in floating storage.

Some Chinese small, independent refiners known as teapots have cut runs due to weak margins leading to lower crude prices.