It became unprofitable for Turkey to buy Russian oil

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Turkey’s largest refinery has sharply reduced purchases of Russian oil. The increased price for Urals became unprofitable for the refiner.

In an effort to gain higher margins, Turkey’s STAR refinery cut its purchases of Urals in 2020, Reuters reported. Instead, processors bought Norwegian and Iraqi varieties.

As part of the OPEC + deal, Russia reduced oil supplies to the world market, and the Urals brand began to trade at a record premium of $ 2 to Brent BFO-URL-EBFO-URL-NWE. As a result, refiners began looking for alternative grades of feedstock to maintain margins, traders said.

The Norwegian brand Johan Sverdrup hit the market last year and is seen by some refineries as a replacement for Russian oil. Including the Turkish STAR refinery with a capacity of 210 thousand barrels per day. It belongs to the Azerbaijani state company Socar and the Ministry of Economy of Azerbaijan.

Traders claim that the refinery launched in 2018 is actively buying Norwegian and Iraqi oil. “Among the three brands, Urals has the lowest value right now,” a source told Reuters. According to Refinitiv Eikon, this year the STAR refinery imported 1.2 million tons of Russian oil, while for the entire last year it bought 6.1 million tons, making Turkey one of the main buyers of Urals.

It should be reminded that Turkey this year has also reduced purchases of Russian gas. It is supplied to the country under long-term contracts pegged to the price of oil products, and this year gas on such terms is more expensive than spot gas.

“Russia has no problems with oil sales. We have problems with gas sales. When the same Turkey reduces the purchase of Russian gas, “Gazprom” has to reduce production. But when Ankara reduces the purchase of Russian oil, Russian companies do not reduce production, but simply re-ship raw materials to other buyers, says Igor Yushkov, a leading analyst at the National Energy Security Fund (NESF) and an expert at the Financial University under the Russian government. … – The Urals oil grade is now in demand on the world markets. This is largely due to the fact that the United States imposed sanctions against Venezuela and banned its refineries from buying Venezuelan oil. As a result, American refineries have found a replacement in the form of Russian oil, since they are tuned in to heavy sour oil, and the Russian one, in terms of its characteristics and price, is well suited to replace Venezuelan oil. “

More dangerous in the case of Turkey may be delays in the passage of tankers from the Black Sea ports of Russia through the Bosphorus and Dardanelles straits, Igor Yushkov believes: “This has happened before. As a result, tankers with several million tons of oil on board (in total) could stand in queues. “