Russian ESPO spot premiums surge to fresh highs, above Dubai +$3/b
London, (Quantum Commodity Intelligence) – Russian ESPO crude has sold at its highest premium for nearly one year, with three cargoes sold by the main Russian exporter Surgutneftegaz at a premium of more than $3.00/b over July Dubai swaps, sources said Tuesday.
The July-loading cargoes of the medium sweet ESPO blend were sold to trading house Mercuria at Dubai +$3.10-$3.30/b, while the same seller is offering a further three cargoes.
The price reflects a sharp increase in the relative price of medium sweet crude, plus a widening of the Dubai crude oil structure.
ESPO cargoes loading in June were sold in the Dubai +$2.40-$2.60/b range, while May barrels sold at Dubai +$1.30-$1.50/b.
Refining margins in Asia have generally been in an uptrend for April/May, although the recent wave of restrictions across Asia and falling Indian demand has seen overall margins slip back.
As a medium sweet crude (API gravity 36, sulfur 0.5%), the grade has strong distillate properties.
On Monday the June swap versus August cash Brent crack for 10ppm diesel basis FOB Singapore – the benchmark across Asia – was marked at $6.59/b, up $0.61/b on the day and the highest in more than a year, according to Quantum data.
Dubai structure firmer
The higher premiums also reflect the firmer Dubai market, as the Dubai cash first-line versus second line (Jul vs Aug) spread moved to a two-month high of $0.75/b Monday, according to Quantum data and trading sources.
Likewise, the M1 vs M3 (Jul vs Sep) cash spread hit a two-month high of $1.35/b, signaling the backwardation is also strengthening along the curve.
June-loading ESPO is effectively priced against September Dubai, which is the front-line month during June, so two months of market structure is built into the premium.
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.
