Turkish lira plunge comes as Tupras raises spot buying

The collapse of the Turkish lira has come at a time when the country's principal refiner, Tupras, has been increasing the volume of crude it buys on a dollar-denominated spot basis. Lira-denominated crude prices have risen by 90pc since the start of the year, during which time the dollar-denominated barrel price has risen by 12pc.

The increase in spot purchasing may be because of seasonal bitumen demand or an anticipation of difficulties in financing or insuring shipments of Iranian crude as US sanctions are reimposed. Turkey has not so far secured an exemption from US sanctions, which come into full effect on 4 November. Washington has wavered in its position on granting exemptions, leaving the fate of Tupras' purchases uncertain.

Data from Turkish energy regulator EPDK show spot purchases comprised 27pc of Turkey's crude imports of 358,000 b/d in January-May.

Tupras has increased its combined volumes of Iraqi Basrah Light and Heavy, Urals, Siberian Light and Caspian CPC Blend each quarter this year. Market data compiled by Argus show the refiner bought 93,000 b/d of these crudes for delivery in the first quarter, 127,000 b/d arriving in the second, and some 198,000 b/d so far due to be received in July-September.

Crude, likely bought in spot tenders, headed to Turkey from Russia, Iraq, Nigeria and Mediterranean ship-to-ship transfer sites or storage in the first five months of the year. These volumes included 56,000 b/d of Iraqi Basrah, 13,000 b/d of Russian Urals or Siberian Light, 15,000 b/d of Kazakh CPC Blend and a rare purchase of 933,000 bl of Nigerian crude in January.

A number of trading firms sell these crudes to Tupras in spot tenders. Sellers are paid in US dollars 60 days after completion of discharge in Turkey. Tender participants are encouraged to notify Tupras if they can offer extended payment. Tupras generally issues tenders between three and four weeks before the required arrival of supply, which means providers can be paid as far as out as three months following the sale. This gap means Tupras sometimes pays a slight premium to other spot-market transactions.

Tupras issued a crude-buy tender for September-arriving Libyan sweet Es Sider, medium-sour Urals and low-sulphur Siberian Light today.

The lira continued to slide today, having already shed one fifth of its value against the US dollar in the week ending 10 August, and having fallen by around 40pc since the start of the year. The currency collapse follows concerns over the government's management of Turkey's economy, and an escalating dispute with Washington that saw US president Donald Trump last week double steel and aluminium tariffs on Turkey.

Tupras declined to comment on the effect of the lira's value on its crude purchases. The refiner last week reported a 29pc year-on-year fall in profits to around TL1.04bn ($190mn), citing higher crude prices and adverse exchange rate movements.