(MENAFN - Arab News) Not surprisingly, a look at Russian export data helps explain the strength in prices.
Although sea-borne shipments from ports in the Baltic in the North and Black Sea in the south have hit record highs this year, exports by the Druzhba pipeline to central Europe have slumped.
At a combined 3.74 million barrels per day in July, sea-borne and Druzhba exports to Europe on the Transneft system fell to their lowest level since early 2009 even as overall Russian oil output has risen by some 400,000 bpd over the same period.
Moreover, the shift in pipeline tariffs on Russia's Transneft system that has encouraged exporters to send more oil to sea terminals at the expense of the Druzhba pipeline has intensified competition for cargoes of Urals.
Transneft is reportedly seeking to maximize throughputs at its new Baltic terminal at Ust-Luga to help repay loans taken out to finance its construction.
Coming at the same time as the European Union's ban on the import of Iranian crude oil, much of which is comparable in quality to Urals, the tightness in Russian westbound exports has been keenly felt.
Of course, a major factor here is Russian government policy, particularly export duties.
A change in tariff policy that favors crude oil exports over refined products, for instance, would doubtless trigger a flood of crude into the market and a corresponding drop off in exports of finished fuels.
Like other oil exporters, Russia is entitled to seek maximum prices for its production and undoubtedly will do so given the importance of oil revenues to the federal budget.
Already a guiding policy for exports has been to shift toward new markets, such as China, to reduce Russia's reliance on the Atlantic basin and increase its pricing power.
The continued development of the Russian refining sector will likely further enhance this market power.