Russian ESPO Blend oil jumps to premium on higher demand from Chinese refiners
Russia's Far East ESPO Blend oil grade has firmed to premium against the Brent benchmark on delivery basis for the first time since November 2023 on higher demand from Chinese refiners cooling India's buying.
ESPO Blend cargoes loading in November traded at premium of $0.20/bbl–$0.50/bbl at DES (delivered ex-ship) China basis, depending on the seller, terms of the deal and loading dates, sources said.
The last time ESPO Blend traded at premium to Brent in Chinese ports on DES basis was about a year ago, data showed.
ESPO Blend is a popular oil grade with Chinese independent refiners, known as teapots, attracted by its good quality and close proximity to Chinese ports.
In June–July this year, ESPO Blend has been trading at discount to Brent amid lackluster demand in China, opening opportunities for Indian refiners to increase purchases of the grade.
Meanwhile, Chinese refineries are seeking the grade ahead of the winter season, while some new players are looking to Russian oil to fuel up the demand.
Yulong Petrochemical, China's the newest refiner, launched a 200,000-bpd crude unit last Friday after four years of construction. The privately-led refiner in September had also stocked up Russian oil ahead its startup.
State trader Unipec, the trading arm of a refining major Sinopec, has also ramped up purchases, taking about 10 cargoes of ESPO Blend loading in October, according to one of the trading sources based in Shandong.
Both players have been "squeezing the smaller teapots refiners" pushing ESPO Blend prices up, he added.
Relatively cheap freight for ESPO Blend oil shipments to China is keeping refiners' interest high. The freight rate was about $1.35 MM per voyage in September, Simpson Spence Young data on LSEG showed.
Chinese demand rebound resulted in lower purchases by Indian refiners, which are not ready to pay high prices for ESPO Blend as they also have to pay higher transport costs. India is a main buyer of Russian seaborne oil cargoes, buying mostly Urals oil as it is diesel-rich.
One of the sources said that Indian refineries find ESPO Blend too expensive now and are unlikely to buy any, while the grade can be replaced with oil grades from West Africa.
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