Russian ESPO, Sokol premiums surge to fresh 2-yr highs
Quantum Commodity Intelligence - Premiums for Russian low-sulfur crude in Asia have surged to fresh two-year highs following strong demand for distillate-rich grades and the steepening Dubai market structure.
ESPO, a medium sweet crude (API gravity 36, sulfur 0.5%), was sold at a premium of over $7/b against Dubai swaps, while light sweet Sokol (API gravity 37.7, sulfur 0.17%) was heard sold at close to +$8/b versus Dubai swaps, according to sources Wednesday.
Both grades were trading at the highest premiums since the late-2019/early-2020 period when low-sulfur barrels were in demand due to the switch to 0.5%-sulfur bunker fuel, as mandated by IMO 2020.
Demand for sweet barrels in 2022 has been driven by distillates, which has seen both Jet and diesel values rocket above pre-Covid levels.
Benchmark 10ppm spot gasoil (diesel) was valued at more than $18/b over Brent, according to Quantum data, while spot jet/kero was assessed Wednesday at Brent +$13.78/b.
Tenders
State-owned Surgutneftegaz awarded three 100,000 mt cargoes ESPO via tender at Dubai swaps +$7-$7.10/b, basis Kozmino, compared to the last-traded level of below Dubai swaps +$5/b last month.
The cargoes will load in the first decade of April, while Surgut has also issued a tender for three further cargoes loading in the second decade of April.
Surgut typically sells ESPO cargoes in three tranches each month, while Gazprom is also an occasional spot seller of the grade.
Sokol equity-producer ONGC sold a 700,000 barrel cargo loading April 19-25 at Dubai swaps plus around $7.90/b, basis Yeosu. The same seller sold an April 2-8 cargo last week at Dubai swaps +$7.50/b.
The grade was trading at around Dubai swaps +$5.50/b last month for March loading.
Backwardation
Both ESPO and Sokol are sold at a differential to Dubai during the pricing month, so the premium includes two months of market structure.
Dubai time spreads have surged this month on supply-crunch fears as the OPEC+ alliance increasingly falls behind on production targets.
The M1/M3 (Apr22/Jun22) has widened to over $4/b this week, at least a decade high, while M1/M3 Dubai averaged $2.23/b in January.
Meanwhile, the March Brent-Dubai EFS has rallied to multi-year highs of over $6/b, making competing arbitrage barrels that price against Brent more expensive for Asian refiners.
