Spot premiums for Russia’s Far East ESPO Blend crude oil have firmed to more than a $1 per barrel premium as worries of possible supply disruption from Iran and firmer prices for Abu Dhabi’s Murban oil fuelled Chinese refiners’ demand, trade sources said.

ESPO Blend cargoes loading at the end of November – early December traded at premiums of about $1 per barrel and slightly higher against ICE Brent on a delivered ex-ship (DES) China basis, the sources told Reuters, rising from premiums of $0.20-0.50 per barrel for cargoes loading earlier in the same month.

The last time ESPO Blend traded at significant premiums to ICE Brent at Chinese ports on a DES basis was about a year ago, Reuters data showed.

ESPO Blend is a popular oil grade with Chinese independent refiners, known as teapots, which also buy large volumes of Iranian oil.

“Russian crude cycle trades earlier than Iran so some guys are worried about Iran given the Middle East issues,” one of the sources said. “So rather than take a chance on Iranian, they might as well buy some Russian stuff first.”

Another source said ESPO prices were supported by demand from new refiner Shandong Yulong Petrochemical and state refiners.

Yulong, China’s latest greenfield refinery, started trial runs at one of its two crude units last month. The refiner has been actively buying ESPO Blend ahead of the plant’s start-up.

A third source said ESPO demand rose because the alternative Murban crude had gotten more expensive.

Still, the rebound in ESPO prices might be shortlived amid lacklustre fuel demand and poor refining margins in China, another source said.

In June-July, ESPO Blend cargoes were sold at discounts to Brent as Chinese independent refiners cut output.

China’s refinery output fell 5.4% versus a year earlier, official data showed on Friday, declining for a sixth consecutive month.
Source: Reuters (Reporting by Reuters reporters in MOSCOW, Florence Tan and Aizhu Chen in SINGAPORE;Editing by Elaine Hardcastle)