On establishing a benchmark crude in the Russian Arctic

Abstract

The article analyzes the prospects for establishing Russian benchmark crude based on the arctic blend “Vostok Oil” with a price basis in Murmansk. The relevance of the study is conditioned by the importance of the pricing system’s transparency for maintaining a stable macroeconomic situation in Russia, with a leading role of Artic oil and gas potential for Russian economic development. The authors highlight the main signs of the modern pricing system’s crisis and note that amid the imposed anti-Russian sanctions pricing at European spot hubs can no longer reflect the real situation in the Russian oil market. As a result, there is a need to create a national pricing system by developing the Russian benchmark based on the crude oil blend with the dominance of “black gold” from the Vostok Oil project, which has a high-expected liquidity. The port of Murmansk, being distinguished by unique technical characteristics and access to the logistics potential of the Northern Sea Route, is proposed as a price basis and a price hub. The article presents a four-stage model for launching a corresponding futures contract on SPIMEX, which will help improve the exchange trading system for energy resources in Russia and increase the popularity of the Russian Arctic benchmark crude in the global oil market. In conclusion, the authors underline that the creation of a new benchmark and the launch of futures will ensure stability, transparency and independence of Russian oil exports.