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. Last Updated: 07/27/2016

Russian Oil Heads to America

LONDON -- Around 3.6 million barrels of crude are set to sail to the United States this month, continuing the trend that is establishing Russia as a valuable energy source for the world's largest oil consumer.

Oil traders jumped into the game this month as arbitrage economics made the trans-Atlantic voyage profitable, but that opportunity is already waning and even big Russian firms are cautious on the prospects for a steady flow.

Traders said U.S. major ExxonMobil and No. 2 oil producer Yukos were the biggest players.

"[Shipments] appear to be a regular event now, even when the economics don't really seem to work," one trader said.

Yukos in July shipped 2 million barrels to the United States for the first time and has since then taken three more shipments from the Black Sea.

Exxon is seen this month lifting 2.7 million barrels for the United States, of which 2 million will sail from the Black Sea. The company is thought to have a deal with Yukos, guaranteeing a steady crude supply to year-end.

The company also received 700,000 barrels from Yukos, which will be dispatched from the Arctic port of Murmansk for the first time. Traders said a second stem could follow mid-month.

Russian companies -- which may ship Urals out of the region for strategic reasons, even when the numbers are not attractive -- have had some company this month.

U.S. refiner Koch bought two cargoes of Urals crude in September, selling them on to other U.S. refiners and delivering part of the oil to the U.S. Strategic Petroleum Reserve, the first ever shipment of Russian crude into the SPR.

European major Shell and J+S, a trading house specializing in Polish sales, have both planned trans-Atlantic shipments for this month, dealers say.

Russian shipments to the United States were at a record high in May at 220,000 barrels per day, according to the Energy Department, but still constituted a very small proportion of the country's imports of about nine million bpd. It is also only around 10 percent of Russia's seaborne exports.

While the relative expense of U.S. crudes with high sulphur content versus comparable Urals helped encourage sales in the past few weeks, traders say the economics of trans-Atlantic shipments is now doubtful as U.S markets' price advantage in relation to Europe has eroded.

"The arbitrage to the United States doesn't really work at the moment because the price there has come off in anticipation of all the shipments that are arriving," one trader said.

Urals is competing now in U.S. markets with many other grades, including North Sea and African low sulphur, or sweet, crude, while sours have been pressured by a deluge of Latin American and OPEC barrels, including higher shipments from Iraq.

October will also see a couple of rare shipments of Syrian sour Souedie crude to the United States by trader Arcadia.

"Everyone is looking at the possibility, but I don't think many people will take barrels trans-Atlantic if the arbitrage doesn't work," one player said.

"And even if the arb looks open on paper, it's proving quite difficult to find buyers there."

Russian crude has been trickling into the U.S. for much of the year, as Washington seeks to diversify energy supplies away from the politically charged Middle East.

Russian oil companies, looking at booming output growth see the United States as a potentially lucrative market.

Yukos is projecting potential exports of 700,000 barrels per day by 2010 to the United States.

But so far other Russian companies appear wary of jumping into the fray.

One Russian trader said his firm had considered shipments to the United States and had later dropped the idea.

"Supplying the U.S. is not our main objective, we'll only do it if it makes us money," he said.

"Yukos is playing this game not because it makes economic sense now, but because it is betting on future perspectives."