Russian Urals prices in the Mediterranean fell to their weakest in over a year on Tuesday, reflecting poor refining margins and an abundance of cheap alternative grades, although traders still expect a recovery if Russian exports fall in June.
"Urals margins have been weak for a long time and now they have just gone negative. Everyone was expecting some strength in May but the market has gone in the opposite direction. I have some, but not much, hope of a big strengthening in June," a Urals dealer with a trading house said.
"There is a May Urals cargo overhang. Some alternative grades such as Azeri and CPC have been trading weakly recently," said a trader with a major. "As soon as the backlog clears and June dates begin to emerge, I expect some strengthening".
In the Platts window, Vitol offered an 80,000-tonne cargo in the Mediterranean for end-May delivery at dated Brent minus $1.60 a barrel, some 25 cents weaker than previous price estimates, traders said. It found no buyers, they added.
The grade last traded in the Mediterranean at such weak levels in March 2013, at a time of large Russian refining maintenance works and heavy exports. By May last year trading in the grade was much stronger, at around parity with Brent.
Russian refining runs are set to rise steeply in June, according to the energy ministry, as the country's idle refining capacity will halve to 758,000 tonnes, representing only 3 percent out of the country's total refining capacity, compared with 6 percent that was idle in May.
In other grades, BP bid for a cargo of CPC for early June at dated Brent minus 25 cents, up some 35 cents, but found no sellers.
Traders said Croatia's Ina awarded a tender to buy either Urals or Azeri to an Azeri Light seller but prices could not be confirmed.
In other light grades, Libya's oil production was at 235,000 barrels per day, but details of output at the large El Sharara oilfield were still unclear after protesters ended a shutdown, a spokesman for the National Oil Corporation said.
(Reporting by Dmitry Zhdannikov; editing by Keiron Henderson)