The tightness in light sweet crude oil supply resulting from the combination of production outages and increased refinery runs is most readily apparent in the absolute price levels of Brent crude oil. However, it is also evident in the Urals differential, the price of Urals crude oil compared with that of Brent. Urals, a Russian crude oil, competes in European markets with many Brent-priced crude oils. The Urals differential for crude oil delivered into the Mediterranean market moved from an average $0.48 per barrel below Brent in June to an increasingly larger premium to Brent for much of July and the first weeks of August, reaching a $2.76-per-barrel premium versus Brent on August 8. The Urals price was also supported by high refinery runs in the former Soviet Union, mostly Russia, which increased from 6.2 million bbl/d in April to 7.1 million bbl/d in August, reducing supplies available for export.
In September, an expected reduction in refinery purchases of crude oil should help to relieve upward pressure on prices even as production outages continue. The IEA expects global crude oil runs to fall to 76.2 million bbl/d in September and to 75.9 million bbl/d in October. As refiners typically schedule crude purchases one to two months in advance of actual processing, short-term refiner demand for crude is likely to taper off. Likewise, EIA projects non-OPEC liquid fuels production, predominantly crude oil, will increase through the end of 2013, with fourth-quarter production averaging 55.0 million bbl/d, increases of 0.7 million bbl/d and 1.3 million bbl/d from the third and second quarters of 2013, respectively.
While crude oil prices have drifted modestly upwards in August, with Brent trading at about $110 per barrel on August 21, it is likely that reduced crude buying has blunted the continued effects of production outages. This is already evident in the Urals differential in the Mediterranean, where Urals is again trading at a discount to Brent. Yet, there is still uncertainty in the price forecast. Trade press has reported recently that labor strife in Libya has yet to subside and that maintenance at the port of Basra could further reduce Iraqi exports in September, though such reports have been disputed by the Iraqi government. Any increase in production outages could put upward pressure on Brent prices. At the moment, however, EIA expects reduced refinery demand and rising supply to largely offset existing outages and bring Brent prices within the $102-$104-per-barrel range, closer to levels seen earlier in 2013.