2018 June 8
The premium that Russia's ESPO blend crude fetches against Platts' Dubai crude assessments slumped to a near nine-month low on Thursday amid poor demand, particularly from China, market sources said.
The ESPO M1 differential to Dubai crude on Thursday was assessed at $2.55/b. The last time the premium was lower was on October 17 last year when it stood at $2.50/b, S&P Global Platts data showed.
A fall in demand from Chinese and Korean end-users has been cited as the major reason for the weaker premiums, market sources said.
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Last year, China imported 73% of the waterborne ESPO exports from the far east Russian port of Kozmino, and a drop in this demand was impacting premiums for the grade, market sources said.
"There is poor demand for ESPO this time. Chinese demand is not so good," a China-based trading source said.
According to a monthly survey done by Platts, crude oil imports by China's independent refineries in eastern Shandong province, as well as Hebei Xinhai Chemical, and Jiangsu Xinhai Petrochemical, dropped marginally by 3.2% month on month to around 8.54 million mt in May, or 2.02 million b/d.
Market sources also said that the recent inflow of US crude into the Chinese market was a possible reason for lower demand for ESPO crude.
"ESPO came under pressure after North Asian refiners bought more WTI Midland," a sour crude trader said.
Chinese trader Unipec bought 16 million barrels of US crude for loading in June, the largest volume it has purchased in a month, market sources said.
For the July loading program, Russia's exports of the medium sweet ESPO Blend crude expected to total 2.6 million mt, up 8.33% from June, the latest monthly loading program showed.
Surgutneftegaz holds eight cargoes for July and has already sold seven cargoes via two tenders. Two cargoes for loading over June 30-July 5 and July 3-8 were sold at a premium of around $3.20-$3.40/b to Platts front-month Dubai crude assessments, FOB. One of the buyers was Shell.
Surgut also sold five cargoes for loading over July 14-18, July 19-23, July 22-26, July 26-30 and July 28-31 at a premium of around $2.50-$2.70/b to Platts front-month Dubai crude assessments, FOB. The buyers were heard to be Shell, Trafigura, Vitol, JXTG and ChemChina.
Previously Surgut sold, via another tender, two cargoes of 100,000 mt each of ESPO Blend crude for loading over May, at premiums of around $3.00-$3.20/b to Platts front-month Dubai crude assessments, FOB.