Russian Sokol crude sinks to record discount as demand slumps — sources

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SINGAPORE (April 6): Russia's Sokol crude, which yields more middle distillates like jet fuel and gasoil from refining, has slumped to a record spot discount in the Asia market, two trade sources said on Monday, as fuel demand takes a hit from the coronavirus pandemic.

Indian oil explorer ONGC Videsh sold one 700,000-barrel cargo of Russian Sokol crude for loading between June 2-8 at a discount of around US$8 a barrel to Dubai quotes via a spot tender that was closed and awarded last Friday, likely to a trader, the sources said.

That is the lowest price differential ever recorded, according to Refinitiv Eikon assessments starting from 2011. 

In comparison, last month ONGC sold a Sokol crude cargo loading May 22-28 at a spot premium of around US$3.20 a barrel to Dubai quotes to a trader, sources told Reuters at the time.

Physical crude prices have been hampered globally amid oversupply as refiners in Asia, Europe and the Americas cut runs or shut down plants.

Vietnam-Malaysia's medium sweet grade Bunga Kekwa crude also slipped from premiums to a spot discount of around US$5 to dated Brent in a tender closed on March 30 for a 300,000-barrel cargo loading May 31-June 1, sources said last week.

Transport fuel demand has taken a beating from stringent government lockdown measures to limit the spread of the coronavirus that causes Covid-19. The measures have disrupted the normal daily activities of some 3 billion people.

Asian refining profit margins — known as cracks — for jet fuel and 10 ppm gasoil slumped to record lows on Friday.

Oil traders are waiting for a meeting to be held later this week among some of the world's top producers - including Saudi Arabia and Russia — to discuss output cuts that could partly alleviate oversupply in global markets, trade sources told Reuters on Monday.