(Updates, adds prices, changes headline)
By Olga Yagova and Gleb Gorodyankin
MOSCOW, March 12 (Reuters) - Saudi Arabia has stepped up
efforts to squeeze Russia's Urals oil grade out of its main
markets by offering its own cheap barrels instead after their
long-standing deal to support global oil prices fell apart,
seven oil sources said.
Cooperation between Moscow and Riyadh dramatically collapsed
last week after Russia refused to support deeper oil output cuts
desired by Saudi Arabia to fight falling oil demand as a result
of the spread of the coronavirus outbreak.
Market sources told Reuters that state-controlled Saudi
Aramco is trying to replace Urals in refiners'
feedstock around the world, from Europe to India.
"They (the Saudis) knock on all doors offering a lot and
cheaply..." a source with a Western oil major told Reuters.
Saudi’s national shipping firm, Bahri, provisionally
chartered up to 19 supertankers this week, with six of them set
to take about 12 million barrels of Saudi crude to the United
States, according to data and sources.
Saudi Aramco is in talks with European refiners, including
big buyers of Urals oil like Finland's Neste Oil, Sweden's
Preem, France's Total, BP Plc, Azerbaijan's
SOCAR, Italy's Eni, the sources said.
The tactic has already started to pay off, with refiners
ordering extra volumes of its crude for loading in April at
"very attractive prices", the sources added.
Saudi Aramco, Neste Oil, Total, BP, Preem, Eni and SOCAR did
not immediately respond to requests for comment.
Saudi Arabia will open the taps beginning on April 1,
releasing 12 million barrels of oil per day (bpd) into the
markets. Russia's maximum production capacity is 11.80 million
bpd, with Asia and Europe being key export markets.
Russian Energy Minister Alexander Novak said on Wednesday
that Saudi plans to raise output was "not the best option".
Novak is meeting Russian oil companies on Thursday in Moscow.
"Riyadh is really mad at Moscow for their move in (the) OPEC
meeting, so they target (the) Urals markets first", a source at
a European trading firm involved in Urals trading said.
Market sources said that Saudi Aramco is trying to replace
Urals in refiners' feedstock in an attempt to punish Moscow and
get the Russians back to the negotiation table.
Saudi Aramco may send an extra 1.5 million bpd to Europe in
April alone, said the third source, who does calculations for a
global trading house, said.
On Saturday, the day after the landmark deal between the
group known as OPEC+ fell apart, Riyadh slashed prices for its
crude to customers worldwide. Brent crude, the international
benchmark, closed just above $33 a barrel on Thursday.
'WONDERFUL PRICES'
Oil wars between Russia and Saudi Arabia are not new: both
were at a standoff before the OPEC+ deal three years ago. But
now Riyadh is ready to go to as far as Belarus.
Russia and its ex-soviet neighbour failed to reach a new oil
supply deal in January, meaning that Minsk started to look for
Urals replacement.
"We've been working with Saudi Arabia since last year, there
was a meeting in London last week... The prices are just
wonderful," a source at a Belarus oil trader told Reuters.
Belarus said it would keep importing alternative crude oil
even if supplies from Moscow are fully restored.
Saudi Arabia is also seeking to replace Urals crude in more
unusual markets for the Russian grade such as India and the
United States, traders said.
"There were phone calls over the weekend from Aramco to CEOs
of majors and big independents about taking an increase in Saudi
oil. My understanding is that this would be oil loading in April
- reaching U.S. in May and June", a U.S. market source said.
Indian refiners that had been increasing Russian oil
purchases in recent months have also ordered extra Saudi oil.
Azeri state firm SOCAR ordered 3 million barrels from Saudi
Arabia for loading in April for its STAR refinery in Turkey,
which so far was processing mainly Urals, two sources said.
And France's Total, one of the top Urals buyers, is in talks
with Saudi Aramco to boost intake of Arabian barrels by some
600,000-700,000 bpd next month, another source familiar with the
company's plan said.
Neste Oil, Eni and Preem may also receive extra barrels from
Riyadh, ranging from a one to three-four cargoes, traders said.
Russia's Urals differentials to dated Brent sank after the
Saudi move, but are still not at historical lows.
(Reporting by Olga Yagova and Gleb Gorodyankin;
Additional reporting by Jonathan Saul in LONDON and Devika
Krishna Kumar in NEW YORK
Editing by Katya Golubkova, Marguerita Choy and Lisa Shumaker)
BP (BP.)
