Russian crude trades higher in Asia as refiners chase distillate-rich grades
London (Quantum Commodity Intelligence) – Light sweet crudes in Asia were trading at higher premiums at the start of June, partly on the wider Brent/Dubai EFS but also as refiners chase distillate and gasoline-rich grades in anticipation of firmer demand later in the year.
This week Russian light sweet Sokol crude for second-half July delivery changed hands at the highest premium since last summer, with a deal reported in excess of Dubai swaps +$3.50/b.
Likewise, Russia ESPO has also consolidated well above $3/b with talk for late-July barrels heard at up to $3.50/b over Dubai swaps, the highest level this year.
Both grades are already favorites of Chinese refiners, but tax changes in China making imports of light cycle oil more expensive is likely to further boost demand for distillate-rich crude.
Light cycle oil is a gasoil/diesel alternative used in agriculture, mining and the industrial sector.
Analytics and tracking company Vortexa said in a report earlier this week, "effective 12 June, a $0.24/b/litre (or 1.52 yuan/litre) consumption tax levied on mixed aromatics and LCO imports is expected to significantly reduce import volumes of these blend components, tightening domestic gasoline and diesel/gasoil supplies."
Asia products strengthen
Meanwhile, the Brent/Dubai EFS hit a one-month high of $3.32/b on June 2, according to Quantum data.
The wider Brent/Dubai spread make barrels pricing versus Dated Brent more expensive for Asia refiners, so it will be more attractive to pay a higher premium for regional cargoes such as Sokol or ESPO, which load from the Russian Pacific.
In the refined products market, Singapore diesel cracks (10ppm gasoil) for Q4 have strengthened by around $1/b over the past month to almost $8/b on Wednesday.
Jet cracks have also firmed for Q4 on anticipation of a demand pickup in commercial flights, with Quantum data showing a gain of more than $1/b since early May, assessed at Brent +$6.67/b on Wednesday.
Gasoline cracks have also been in an uptrend over recent weeks, with Q4 standing at Brent +$5.50/b Wednesday.
