Even if we leave aside differences in configuration and, hence, the refined product mix, spreads between product prices and feedstock costs continue to widen, and this is especially true for Urals. As seen in Fig. 4, the average price gap between a tonne of gasoline and a tonne of Urals was around $670 in June, compared with $170 six months ago, while in the case of Brent it was around $500. Middle distillates show the same trend, with a tonne of kerosene and diesel fuel priced at a premium of $730 and $630 to Urals vs. $565 and $455 to Brent, respectively.
So refiners in Europe are earning lucrative margins and have no plans to shift to lighter oils, which is quite understandable, considering the region’s focus on reducing dependence on hydrocarbons for power generation in the coming decades. Meanwhile, they are betting on Iranian Light, a medium sour grade, as they transition from Russia’s heavy crude. The nuclear deal has re-emerged in the headlines this week. Should the new round of talks with Iran come to a standstill, a shortage of heavy oil grades will become an even more real threat, and the Urals discount to Brent will narrow as the ban on seaborne imports of Russian crude oil takes force.