Far East Russian ESPO crude differentials dip on softer Chinese demand
Price differentials for Far East Russian crude ESPO Blend have been on a steady downtrend in March, with demand for the sour crude blend significantly impacted by bleak Chinese demand, traders told S&P Global Platts Monday.
Price differentials for ESPO M1 cargoes assessed by Platts — loading 15-45 days ahead — are at a month-to-date average of $3.43/b, down 85 cents/b from the February average, S&P Global Platts data showed.
Demand for the residue-rich crude grade — often preferred by Chinese buyers for its yield and short transportation time from Kozmino in eastern Russia — has suffered on the back of muted buying interest from Chinese teapot refiners as they grapple with implications of a new tax enforced by the administration this year.
Sellers of the crude often book barrels to unload at Chinese ports a few months ahead with the assurance that they will be sold even before reaching the destined port. However, cargoes of ESPO and other typical crudes making up the typical Chinese demand have been waiting at ports in recent weeks despite reduced asking prices, traders told Platts.
ESPO premiums in the spot market for May-loading cargoes were trading in the “low $3s/b, earlier laycans [at] lower premiums,” one Chinese crude oil trader said.
The daily price differential assessment for ESPO M1 has held at a four-month low of $3.05/b against Dubai as of March 22, a level it was last at on November 6 last year.
The crude blend’s spread to Middle East light sour Murban crude stood at 12 cents/b on March 23, and averaged 43 cents/b month to date, compared to monthly averages of $1.54/b and 94 cents/b in January and February, respectively.
“A low spread looks reasonable compared to Murban, as [demand] is not that strong [from Chinese buyers],” the crude trader added.
Recent spot tenders in the Asian sour crude market reflected softer premiums, with Russia’s Rosneft selling a 100,000 mt cargo scheduled to load over the first decade of May at a premium of around $3.25/b to Platts front-month Dubai crude assessments, FOB, sources said. The buyer could not be confirmed.
Earlier in the month, Russian Surgutneftgaz sold two similar-sized, May-loading cargoes to Chemchina and Vitol in the same price range, sources said.
Comparatively, Rosneft last sold a 100,000 mt cargo of ESPO crude for loading over April 11-14 at a premium of around $4.20/b to Dubai to JXTG Nippon.