Company Watch: LUKoil says crude flow to China will reduce Brent/Urals spread

MOSCOW, December 6 (RIA Novosti, Peter Lavelle) - LUKoil CEO Vagit Alekperov told Germany's Handelsblatt newspaper that the redirection of Russian oil from Europe to the east, and China in particular, will reduce the price spread between Russian blend Urals and European benchmark blend Dated Brent. Russia's Ural blend sells at a discount to Brent because of its high sulfur content.

Brent cargoes are known as Dated Brent cargoes once they acquire a specific set of loading dates, usually at a point about two weeks from loading. Before this point, Brent cargoes are typically traded generically as so-called 15-day Brent. The dated Brent market generates prices which have become a key benchmark for contract pricing of crude oil worldwide.

In comments apparently aimed at satisfying President Vladimir Putin's recent demand that the Brent/Urals spread be reduced, Alekperov said Russia would be careful not to inundate Europe with its oil and would instead build pipelines to China, potentially reducing the price difference to $0.5/bbl-$0.7/bbl. Urals trades at a $3/bbl-$4/bbl discount to Brent at present.