May 23, 2019 / 2:46 PM / 4 months ago

Traders indicate preliminary discounts for Kazakh crude tainted in Russia

MOSCOW (Reuters) - Oil traders from Kazakhstan have been seeking big discounts from producers for Urals crude oil that has been tainted in a Russian pipeline, trading and industry sources said on Thursday.

One of Kazakhstan’s oil exporting routes goes via the Atyrau-Samara pipeline and further through the Russian pipeline network to the Baltic Sea port of Ust-Luga.

Russia’s oil exports have been disrupted since April after high levels of organic chloride were found in crude pumped via a large pipeline.

Six tankers with 600,000 tonnes of tainted oil were loaded at Ust-Luga, Kazakh Deputy Energy and Mineral Resources Minister Aset Magauov has told Reuters.

Trading companies have made payments to Kazakhstan for selling their oil that was contaminated when transiting Russia factoring in large preliminary discounts, according to market sources.

Traders who bought oil from Kazakhstan between mid-April and early May have made payments with a discount of $10-11 per barrel. The figures are preliminary and may change depending on final prices of crude to buyers around the world and could both go up or down, trading sources said.

“The payment was a gesture of goodwill. Some Russian oil buyers decided against paying at all. We paid to Kazakh producers but factoring in a preliminary discount”, one of the traders said.

According to Reuters calculations, the pricing spread for the cargoes of Urals from Ust-Luga declined to $20 per barrel compared with the same parcels from neighboring Primorsk in mid-April - early May.

Kazakhstan plans to seek compensation from Russian pipeline monopoly Transneft, a senior Kazakh energy official said last week.

Kazakhstan, which produces around 1.8 million barrels per day (bpd) of oil, is the second-biggest oil producer among former Soviet countries after Russia. The country exports around 12 percent of its oil via Russia’s Ust-Luga.

Reporting by Alla Afanasyeva; writing by Vladimir Soldatkin; Editing by Elaine Hardcastle and Alexandra Hudson

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