Norwegian oil flows to Europe, the Urals to Asia

MOSCOW, April 18 (Reuters) – Norway’s Johan Sverdrup is the clear winner in the race to replace Russian oil at European refineries, according to data from Refinitiv Eikon and information from traders.

Johan Sverdrup is a newcomer to the Russian Urals mix as it was only released in 2019.

Initially, it was mainly shipped to Asia, but the EU ban on imports of Russian oil by sea in December opened up the European market for it, making it the main raw material for refineries in Germany, Poland and Finland.

Now Russian producers have to pay for longer routes to India and China, and Johan Sverdrup has become one of the most sought-after oils in North-West Europe.

Johan Sverdrup and Ural are medium acidity grades with high diesel yields, with the Norwegian grade being very similar in quality to the Russian competitor but containing less sulfur.

European refineries import a wide range of crude oil types from around the world, including sweet crude from Kazakhstan, Azerbaijan and Africa, used, among others, in for the production of oil and gasoline.

“Johan Sverdrup has become a key element of the European oil industry, effectively replacing the Urals as the reference medium acid grade,” said Victor Katona of Kpler.

Imports of Johan Sverdrup’s blend to Poland via the port of Gdansk rose to a record high of over 8 million barrels in March, according to data from Refinitiv Eikon.

Poland stopped buying Russian oil in February – the largest refinery PKN Orlen terminated the only remaining contract with Tatneft.

PKN Orlen’s Lithuanian refinery in Mažeikiai is also increasing its purchases of Johan Sverdrup, receiving at least two deliveries this month with a total value of around 1.2 million barrels.

According to data from Refinitiv Eikon, this grade now accounts for at least half of Finland’s monthly oil imports.

Demand was supported by Johan Sverdrup’s FOB differential, which rose shortly after the EU embargoed Urals sea shipments and moved to a premium over Brent for immediate delivery in February, according to traders.

PRODUCTION LIMITATIONS

Norway’s Equinor can currently produce 720,000 barrels a day from the Johan Sverdrup field, but said it would explore the possibility of increasing production to 755,000 barrels a day.

While Europe is increasing Johan Sverdrup’s purchases, shipments of this blend to Asia have plummeted.

Asia’s demand surpassed 100 million barrels in 2021, compared with just 2 million barrels delivered this year, according to Refinitiv Eikon.

Urals oil fills the deficit in Asia: in 2022, sales increased 10 times, and this year even more.

Deliveries of the Urals to Asia have already exceeded half of last year’s volume, according to data indicating record sales in 2023.

Some Russian oil still ends up in Europe. Bulgaria has received EU permission to continue importing Urals oil, while Slovakia, Hungary and the Czech Republic continue to buy it through the Druzhba pipeline.

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(Reuters reporters, translated by Tomasz Kanik)