Why CPC Blend Trades Above Brent and What This Means for Kazakhstan

In Kazakhstan, at the beginning of November, Kazakhstani oil CPC Blend was trading at approximately 116 dollars per barrel, while the price of Brent stood at 109 dollars. Both grades had declined following an autumn rise, but CPC Blend maintained a premium over the global benchmark.

According to Muratbek Makhanov, an expert in the oil and gas sector, price quotes were influenced by expectations of de-escalation around Iran, OPEC's increased production, and weakening demand amid expensive oil. However, comparing prices may be inaccurate: the cost of CPC Blend often includes delivery to the buyer, tanker freight, and insurance, whereas Brent may be valued as an exchange-traded futures contract.

The premium for the Kazakhstani grade is also supported by its route through the Caspian Pipeline Consortium to the Black Sea and further, including the Mediterranean. Deliveries via this route do not depend on passage through the Strait of Hormuz. Additionally, CPC Blend is classified as a light grade, from which it is profitable to produce gasoline, diesel, and other light petroleum products. However, quality does not account for the entire current price gap: it was the same previously.

The additional markup for supply accessibility may decrease if exports from the Middle East recover, tankers and insurance become cheaper, or European refineries find more alternatives. Demand and potential disruptions in exports via the CPC will also affect the price.

A higher price could increase Kazakhstan's export revenue if supply volumes are maintained. However, from January to September, the country's production amounted to 69.4 million tonnes—a decrease of 8.3 percent compared to the previous year. Therefore, the final outcome depends not only on price quotes but also on sales volume, extraction and transportation costs, and contract terms. The revenues of oil companies, the budget, and the National Fund are not the same amount.