Russian Urals crude premiums for delivery to India have fallen to near parity with dated Brent as weak refining margins in Asia weigh on demand, three trading sources told Reuters.
The decline is squeezing sellers' profits, already under pressure from record freight rates that are eating into Russia's oil and gas export revenue.
Urals cargoes for December delivery to India were trading at around parity with dated Brent on a delivered basis, traders said. Some cargoes were offered at a slight premium, while others were discussed at a discount to dated Brent, they said.
Brent crude futures were down $2.28, or 2.2 per cent, to $103.78 a barrel at 07:29 GMT, while US West Texas Intermediate crude futures were down $1.34, or 1.4 per cent, to $93.75, reversing gains from the previous session.
Trading activity has been subdued as market participants await November loading schedules.
Urals premiums in India eased after climbing to about $8 a barrel in September, their highest since spring, as supply shortages linked to the Middle East crisis and strong demand from China tightened the market.
However, elevated crude prices and shipping costs have squeezed Asian refiners' margins, prompting many plants to cut runs and reducing their willingness to pay steep premiums for Russian crude, traders said.
As a result, sellers have lowered offers towards levels last seen in the summer.
Record costs for shipping crude on supertankers are also pressuring refining margins across Asia, where refiners remain heavily reliant on Middle Eastern supplies, the International Energy Agency said in its monthly oil market report.
(Reporting by Reuters. Editing by Mark Potter)