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Financials

Russian govt approves blueprint for Urals crude futures

MOSCOW, May 31 (Reuters) - The Russian government has approved a blueprint aimed at launching Urals crude futures in November, including some changes related to oil exporting schedules, according to a document seen by Reuters on Tuesday.

The contracts are expected to be launched at St Petersburg International Mercantile Exchange (SPIMEX), Russia’s largest commodities exchange, with a view to trade Urals futures on a free on board (FOB) basis of the Baltic Sea port of Primorsk.

Russia has been trying to launch a Urals futures contract for a decade, ever since President Vladimir Putin said he was unhappy that the blend was sold at such a big discount to Brent.

SPIMEX’s first deputy president, Mikhail Temnichenko, told Reuters the oil pipeline monopoly Transneft would have to have formed its exporting schedule for Primorsk no later than by the fifth day of each month preceding the month of the shipments, in order to facilitate trading.

“Based on the FOB Primorsk, one may sell all the Russian oil at all the outlets, it should be very convenient,” he said.

Currently, the schedule is formed no less than a week before the start of the month for which the plan is made.

Temnichenko said Transneft has to move to the new method no later than October when it would provide the schedule for November.

Oil industry experts and companies’ officials are sceptical that Urals can be traded as a standalone benchmark.

Analysts and traders say the main reason for the failure so far to launch is the absence of a liquid over-the-counter physical market for Urals, which makes the creation of exchange-traded derivative instruments problematic.

Urals is currently priced in the physical market at a discount to Brent by pricing agencies, which poll traders and refiners.

According to Reuters data, the discount in the Mediterranean BFO-URL-E averaged around $0.84 per barrel in 2015 and $0.99 in 2014. Russia normally exports almost 2 million barrels per day of the Urals blend from its Baltic and Black Sea ports. (Reporting by Olga Yagova; writing by Vladimir Soldatkin, editing by David Evans)

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