Russian ESPO oil prices at 21-month high, boosted by strong Chinese demand

SINGAPORE, Sept. 16 (Reuters) – The rebound in demand for crude in China has pushed prices of a Russian-grade popular with independent Chinese refiners to the highest in 21 months, several trade sources said Thursday.

Russian firm Surgutneftegaz (SNGS.MM) sold three cargo shipments of ESPO crude in November at premiums ranging from $ 4.00 to over $ 4.20 a barrel at Dubai quotes, the sources said, most high since January 2020.

This is a sharp rebound from last month, when premiums for cargoes loaded in October hit their lowest level in four months, between $ 1.80 and $ 2.20 a barrel.

European trader Mercuria may have won the tender, the sources said, while one of the shipments was sold to Japan’s Itochu, the traders added.

The rise in ESPO crude spot premiums signals strong demand from independent Chinese refiners as they expect Beijing to issue a fourth batch of import quotas. The quotas will have to be used before the end of the year, one of the sources said. Read more

Limited offerings of alternative grades of crude oil in the market have also helped support ESPO Blend premiums, traders said. The supply of qualities linked to Brent to Asia is capped by a large Brent-Dubai gap.

“Demand is healthy and margins are good,” the source said, adding that new demand for ESPO crude also came from a new Chinese refiner.

Jiangsu Eastern Shenghong Co Ltd (000301.SZ), which received its first crude import quota of 2 million tonnes this month, is purchasing ESPO crude in addition to Saudi oil for testing at its new refinery, a said a business source close to the company. .

The eastern port of Lianyungang, which is connected to the 320,000 barrels per day Shenghong refinery, can currently only accommodate Aframax tankers, he added.

Gazprom Neft also awarded a tender on Wednesday to sell 100,000 tonnes of ESPO mix for loading Nov. 3 to 13 at a premium of $ 3.70 to $ 3.80 a barrel, traders said.

ESPO crude is typically sold in cargoes of 740,000 barrels and 1 million barrels carried on smaller tankers of the Aframax and Suezmax classes, compared to Very Large Crude Carriers which can carry 2 million barrels of oil at a time.

Reporting by Florence Tan, Chen Aizhu and Olga Yagova; edited by Clarence Fernandez and Jason Neely

Our Standards: The Thomson Reuters Trust Principles.

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