Russia ESPO crude premiums sink to four-month low of Dubai +$3/b

Quantum Commodity Intelligence - Premiums for Russia's ESPO medium sweet crude continued the downwards slide from last month's pre-pandemic highs, with the latest tender from state-owned Surgutneftegaz awarded at the lowest levels since August.

Premiums for early-February cargoes were reported at around $3/b over Dubai swaps, in stark contrast from the 22-month high premiums of up to Dubai swaps +6.50/b for 1H-January cargoes awarded at the same stage last month.

The lower premiums reflect the weaker Dubai market structure, cheaper arbitrage barrels due to the narrower Brent/Dubai EFS and sluggish spot buying from Chinese independent refiners.

However, the strong recovery in Asian gasoil and jet cracks did little to underpin the distillate-rich grade.

The keenly-watched monthly Russian ESPO tenders are considered a bellwether for medium sweet crude (API gravity 36, sulfur 0.5%) in Asia.

The grade is sold as a differential to Dubai during the month of pricing, so the premium includes two months of market structure.

Dubai time spreads have come under pressure this month on oversupply fears in the first quarter, with the M1/M3 (Feb22/Apr22) narrowing to around $1.50/b, according to Quantum data, compared to around +$3.50/b one month ago.

The Brent Dubai EFS dipped below $3/b this week, making competing arbitrage barrels such as the North Sea, West African and the US more competitive. The front-line EFS averaged around $4.50/b in November.  

Export volumes of ESPO from the port of Kozmino average 650,000-680,000 bpd, with a further 800,000 bpd sold to China via pipeline.