One takeaway from the current situation around Russian crude oil is that if the price reduction is cheap enough, Russia would still find potential buyers in businesses that rely on Urals crude. There have been reports that Shell bought Russian oil at a record discount of $28 a barrel amid sanctions.
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Despite a week in which no western buyer for Russian oil was ready to step up, thus creating a bidless market for Russian Urals crude and a nearly offerless market for non-Russian oil, a western buyer decided to step up.
Shell, Europe’s leading oil corporation, acquired a cargo of Russia’s premier crude at an unprecedented discount, emphasizing the corporation’s commitment to uphold purchasing supplies from the nation after it initiated its special military operation, reports Wall Street Journal.
According to Bloomberg, Shell spent $28.50 a barrel less than Dated Brent for the cargo, which was originally purchased from Russia by oil broker Trafigura Group. Shell will not have to worry about transportation since the cargo was purchased on a delivered basis.
Bloomberg reports, citing a source familiar with the situation, that Shell is continuing to import oil and gas from Russia, is in talks with governments, and will abide with any regulatory adjustments.
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The agreement not only highlights the steep discount Russia will now have to market its oil at – approximately 25% below spot – but it also serves as the first sign that there is a clearing price for just about everything, and that if the price reduction is cheap enough, Russia would still find potential buyers in businesses that rely on Urals crude.
And now that Shell has demonstrated to the remainder of the globe that it could be accomplished, we anticipate great majority, if not all, western companies to scurry to make an offer for Russian oil, particularly given that regular spot Brent is currently trading roughly $115 on its way to $200, and the Russian discount to spot will gradually but certainly return to zero.