Russian ESPO spot premiums soar, Surgut tenders more cargoes
London, (Quantum Commodity Intelligence) - Russian ESPO crude traded at the highest premiums of the year so far this week, with three cargoes sold by the main Russian exporter Surgutneftegaz at premiums of around $2.40-$2.60/b over June Dubai, trading sources Friday.
The June-loading cargoes of the medium sweet ESPO blend were sold via tender on the first batch of June cargoes offered by Surgut, with the same seller offering out a further five cargoes Friday.
Shell, Vitol and Mitsui were reported as the buyers.
The premium reflects a sharp increase for medium sweet crude, plus a widening of the Dubai crude oil structure.
ESPO cargoes loading May were sold in the region of Dubai +$1.30-$1.50/b, while the June premiums mark a five-month high.
Refining margins in Asia have generally improved this month, especially the gasoline crack which has been trending higher with the 92 RON/Brent crack assessed $7.35/b on Friday.
Brent/Dubai EFS widens in April
Export volumes of ESPO from the port of Kozmino average 650,000-680,000 b/d, with a further 800,000 b/d sold to China via pipeline.
Seaborne ESPO largely supplies refineries in Northeast Asia, particularly China.
Occasionally an ESPO arbitrage will opens up to the US, particularly if the Dubai benchmark is relatively weak versus Brent.
In March of this year trading house Mercuria shipped around 2 million barrels to the US West coast, while oil major Chevron sent a further million barrels, shipping data showed.
Dubai has lost ground versus Brent in recent weeks with Quantum assessing the Brent/Dubai EFS at above $3/bl for the past 5 days (April 12-16), around a 13-month high.
On a cash-versus-cash basis, June Brent is trading at around $2/b over Middle East grades such as Dubai, Oman and Upper Zakum.
On a like-for-like cash basis, ESPO is around $1.50/b over Dubai and $0.50/b discount against Brent futures. ESPO competes against the slightly lighter Murban crude in Asia, which last month was listed as a futures contract by ICE Futures Abu Dhabi (IFAD).
At close of business Friday in Asia (1630 Singapore) Quantum assessed June cash Dubai at $65.10/b, June cash Brent (BFOE) at $67.06/b, while IFAD Murban futures for June settled at $65.68.
On an implied basis, June ESPO is valued at around $66.50/b, although ESPO has a freight advantage over most grades sold into China.
