July 2, 2012 / 4:19 PM / 5 years ago

Med crude-Urals rallies as Iran embargo starts

LONDON, July 2 (Reuters) - Russian Urals crude extended its
rally to trade at a premium to benchmark dated Brent on Monday,
the first time since February, as traders cited strong refining
margins and scarcity, and analysts pointed to the start of a EU
embargo on Iranian oil imports.
    Traders also said Urals had begun lending support to other
grades, including CPC which was gradually recovering from its
lows reached last month.
    "Urals is rallying like crazy. I don't think there is much
upside left but the problem is that if you sit and wait for too
long you can end up without having a cargo at all," said a major
buyer of Urals in the Baltic.
    There was no activity in the Platts window, traders said.
    But they added that Surgut sold three July Urals cargoes
from the Baltic Sea port of Primorsk with a July 22-23 stem
selling at a premium of around 15 cents to dated Brent, a July
24-25 stem slightly cheaper and a July 27-28 cargo at around
dated Brent flat. 
    A cocktail of bullish factors helped push Urals higher over
the past weeks, said David Wech from JBC Energy consultancy
listing such factors as improved refining margins and cargo
cancellations from Russian ports.
    "Over the coming months, we expect the European sour crude
market to retain its current strength... As the summer period
has historically seen the highest Iranian crude purchases by
European countries supplies will remain tight," said Wech.
    "While some of the lost Iranian barrels will surely be
covered by Iraqi and Saudi term volumes, Urals should remain the
go-to grade for regional refiners," said Wech referring to a
full EU embargo on Iranian imports from July.
    Russian data showed on Monday that the country was on course
for its highest output in the post-Soviet era this year helped
by new fields after a 1.1 percent rise in the first half.
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    Traders said the Urals rally has started supporting even
grades such as light CPC. One trader said he understood the that
had strengthened close to minus $2 to dated Brent from the
previous minus $2.75 a barrel.
    July loading cargoes of Algeria's light sweet Saharan Blend
were sold out, one trader said, and discussion of August cargoes
has yet to start as market participants await the Libyan
official selling prices due out this week.
    "The Libyans are expected to slash the OSPs drastically to
make them competitive," said a regular lifter. Libya's main
export grade Es Sider has been consistently trading far below
its OSP for months, and lately at discounts to dated Brent.

 (Reporting by Dmitry Zhdannikov, Julia Payne, Ikuko Kurahone
and Gleb Gorodyankin; Editing by William Hardy)

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