Russia’s Far East flagship ESPO Blend oil prices fell to the weakest levels in 10 months amid cooling demand from its main consumer China, with prices for April loading flipping into a discount in Chinese ports for the first time since June last year, four trade sources said on Friday.

ESPO Blend oil cargoes loading for next month traded at a discount of about $1.50 per barrel and above against the ICE Brent benchmark on a delivered basis to China, the sources said. It is the lowest price level since last June, Reuters data shows.

That marked a sharp fall from a premium of above $2 per barrel to ICE Brent on a delivered basis for March-loading cargoes.

The collapse in prices came as Russian shipments to China have rebounded after more non-sanctioned tankers joined the trade, while some major buyers shied away from the market due to concerns over dealing with the sanctioned firms.

China’s state-run Sinopec 600028 and Zhenhua Oil halted purchases of March-loading Russian oil, Reuters has reported.

The situation continued for April and early May loadings, the sources said.

One of the sources said that some Russian oil exporters that usually issue tenders in advance hold off sales of May volumes, which might be due to weak prices.

Buying among Chinese independent refiners continued, but the buyers require “clean” non-sanctioned vessels for ESPO Blend supplies, two of the sources said. If the vessel or the producer have sanction traces the discount my increase by up to $1 per barrel, they added.

ESPO Blend though is a popular oil grade with Chinese refineries thanks to its good quality and close proximity to the ports.

Expectations of rising Russian oil exports in April-May amid seasonal maintenance on Russian refineries also added to the price weakness. Lower refinery processing means oil companies have more crude oil for exports.
Source: Reuters