Buyer Finally Emerges For Russian Oil Offered At A Record $28 Discount

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by Tyler Durden
Friday, Mar 04, 2022 - 08:00 PM

After a week when not a single buyer for Russian oil was willing to step up, bifurcating the market into what was effectively a bidless market for Russian Urals crude and an almost offerless market for non-Russian oil, today - for the first time - a western buyer stepped up when Shell, Europe’s largest oil company, bought a cargo of Russia’s flagship crude at a record discount, underscoring the company’s decision to keep buying supplies from the country after its invasion of Ukraine.

According to Bloomberg Shell paid paid $28.50 a barrel below Dated Brent, taking the cargo from oil merchant Trafigura Group which had bought the cargo originally from Russia. The cargo has been bought on a delivered basis, meaning Shell won’t need to sort out transportation.

Quoting a person with knowledge of the matter, Bloomberg notes that Shell is continuing to buy oil and gas from Russia, and is in discussion with governments and will comply with any changes in regulations.

The deal not only underscores the deep discount Russia is going to have to sell its oil at - which amount to roughly 25% to spot - but more importantly, it is also the first indication that there is a clearing price for everything, and that Russia will still find willing buyers in companies that are reliant on Urals crude if the discount is low enough.

And now that Shell has shown the rest of the world world it can be done, we expect most if not all western companies to scramble and bid for Russian oil, especially when considering that regular spot Brent is trading around $115 on its way to $200, and with that the Russian discount to spot will slowly but surely drift back to zero.