Shell Buys Russia’s Flagship Urals Oil at a Record Discount

(Bloomberg) -- Shell Plc, Europe's largest oil company, bought a cargo of Russia's flagship crude at a record discount, underscoring the company's decision to keep buying supplies from the country after its invasion of Ukraine.

The company paid about $28.50 a barrel below Dated Brent, a benchmark for physical oil trades globally, taking the cargo from Trafigura Group. The cargo has been bought on a delivered basis, meaning Shell won't need to sort out transportation.

Shell is continuing to buy oil and gas from Russia, a person with knowledge of the matter said on Wednesday. The company is in discussion with governments and will comply with any changes in regulations, the person said. In a series of Twitter posts on Friday, the company said it's buying Russian supplies to maintain fuel deliveries to its customers, and that Shell will reduce purchases as alternative crudes become available.

The decision is a pivotal moment for the oil market. Governments so far haven't banned Russian oil and gas, wary of the price surge that such a step would cause. The purchase by Shell, which is also one of the world's largest oil traders, may be seen as a symbolic act by the rest of the market.

The trade is the first such deal in a window organized by S&P Global Platts since Russia invaded Ukraine. While it underscores the deep discounts Russia is going to have to sell its oil at, it's also the first indication that it will still find some willing buyers in companies that are reliant on Urals crude.

Rosneft, the Russian oil giant, is in the throes of trying to complete a huge tender to sell crude. The company is tendering for the sale of as much as 83 million barrels of Urals from April to October. Shell's purchase is unrelated to that, but it will also give a sense of the price of Russian oil following the invasion.

Urals has been available for purchase at deeper and deeper discounts to Dated Brent ever since the invasion and, until Friday, had not attracted bidders.