Argus conference participants discussed Urals prospects as a benchmark
Argus held the 6th Argus Russian Crude Market international conference on 24 June in Moscow. The conference brought together major players of the Russian crude market and was focused on the Urals prospects as a price benchmark.
Kirill Molodtsov, Deputy Minister of Energy of the Russian Federation, stressed the importance of the Russian crude trading on the St. Petersburg International Mercantile Exchange (SPIMEX), which is scheduled to be launched in November this year. “Crude production costs are constantly growing, so the government today aims to increase the crude sales accordingly. The current obstacle to this is that the price for Urals is indexed to Brent. Creating a benchmark for Russian export crude would be a vital step towards independent and transparent pricing for Russian crude”, Molodtsov said. “The Ministry of Energy estimates that sales and trading in deliverable futures on SPIMEX will reach 200,000 contracts in 2017.”
Anatoly Golomolzin, Deputy Head, Federal Antimonopoly Service of Russia, presented a report on “Russian benchmark crude”. According to this report, it is crucial to establish proper reference prices both on commodities and financial markets. The Federal Antimonopoly Service of Russia works closely with other agencies to prepare launch of the deliverable futures contract for Russian export crude. “All key issues related to the exchange trading development and establishing a benchmark have been negotiated or settled”, Golomolzin said.
Pavel Ivanov, Head of Commodity Market Unit, Securities Market and Commodity Market Department of the Central Bank of the Russian Federation, reported that the Central Bank expects amendments to be made soon to the law on trading, which will allow non-resident companies to participate in trading on Russian exchanges.
Igor Katsal, Deputy Vice President, Head of Oil Transportation, Metering and Quality Department at Transneft, presented an annual report on the Russian crude quality. Igor Katsal noted that Transneft currently blends six export crude grades. He said that in the context of exchange trading, where Russian export grades have to meet all the requirements to benchmark grades, the company’s strategic goal is to maintain stable and homogeneous parameters in export sales. He emphasized that the technical reconstruction of the system facilities, which is being carried out by the company, may ensure that Urals gains the benchmark status.
Alexey Rybnikov, President of SPIMEX, shared his view on the future Russian crude trading with the market participants and answered numerous questions. “We are now addressing practical issues related to the launch of a futures contract for Russian export crude. In our opinion, one of the vital issues is how intensely Russian oil companies make their own preparations for the trading, for using this instrument on the market. We are developing this contract, first of all, to provide the companies with a hedging mechanism, which will later grow into a benchmark and a pricing mechanism”, Rybnikov said.
At the round-table “Benchmark grades evolution”, the conference participants discussed the prospects of benchmark grades on the global market and issues related to the benchmarks creation.
James Gooder, Vice President for Crude, Argus, explored how Brent is losing ground as a benchmark grade and may be replaced by new grades, including WTI Houston and Urals. The famous expert in crude oil pricing, Jorge Montepeque, who currently holds the position of VP Origination at Eni Trading & Shipping, also noted that although not as strong as before, Brent is still a key grade. “In the way things work, the most important benchmark is Brent. It is old, and it's showing its age, and its age is due to the maturity in the oil fields. So there is a need by the publishers to renew, to reformulate the benchmarks”, Mr Montepeque said.
The conference was attended by over 100 market participants including the representatives of Transneft, LUKOIL, Rosneft, NOVATEK, Gazprom Neft, Petromarket, KNGK Group, Gazprom Export, Neftisa, Zarubezhneft, Vitol, IPC, Trafigura, Totsa Oil Trading, Eni Trading & Shipping and others. The conference concluded with a traditional cocktail party on the InterContinental Hotel rooftop offering a splendid view on the night Moscow.
The next Argus Russian Crude Market conference will be held in June 2017.
For information please contact Argus Conference team:
+7 495 933 7571