Spot premiums for Russia’s Far East ESPO Blend crude oil shipments to China rose to their highest since the Ukraine war broke out in 2022 on robust winter demand and as prices for rival grades from Iran firmed, three trade sources said on Tuesday.
ESPO Blend cargoes ESPO-DUB loading in January traded at premiums of about $1.30 to $1.50 per barrel against ICE Brent on delivered ex-ship (DES) China basis, the sources told Reuters, rising from premiums of $1 per barrel for cargoes loading in November and December.
It is the highest premium level for ESPO Blend to ICE Brent at Chinese ports on DES basis since 2022, when prices of Russian oil collapsed due to western sanctions on Moscow over the war in Ukraine, Reuters data showed.
Demand for ESPO Blend firmed amid fresh buying from Chinese independent refiners, known as teapots, which received a new batch of import quotas for use by the end of 2024.
China has issued an additional crude oil import quota of at least 5.84 million metric tons (116,800 barrels per day) to independent refiners.
ESPO is also favoured by Chinese refiners in the cold months as it produces winter-grade diesel used for transportation, especially in cold regions like northern China, a trader at an independent refiner said.
The sources declined to be named as they were not authorised to speak to the media.
Rising prices for Iranian oil, of which Chinese independent refiners are the biggest buyer, fuelled premiums for ESPO Blend as well, traders said.
ESPO prices were also supported by Chinese oil majors’ purchases for stockpiling, leaving fewer available cargoes in the market, Vortexa analysts said in a recent report.
Beijing asked state oil companies this year to add about 60 million barrels of crude to the country’s emergency stockpiles to boost supply security.
The tightness of Russian and Iranian supplies will last for months, according to Vortexa analysts.
Source: Reuters (Reporting by Aizhu Chen and Siyi Liu in SINGAPORE, Reuters reporters in MOSCOW; Editing by Florence Tan and Nicholas Yong)