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Russia’s ESPO crude blend shipped to Asia has recently seen spot deals at parity with Middle Eastern benchmarks in a sign that the export grade Russia is shipping out of its Far East port Kozmino is recovering in pricing amid high demand from Russia’s top buyers China and India.
At least two cargoes loading over the next two months have been sold with ESPO prices at par with the Dubai benchmark, trading sources told Reuters on Monday.
In the early weeks of the Russian invasion of Ukraine, ESPO slumped to a discount of as much as $20 per barrel to regional benchmarks as traders and companies were confused about potential sanctions on Russian oil shipments.
Prices have rebounded from those lows, at least for some cargoes, as India and China continue to buy Russian oil. Moreover, the EU has recently decided to add exemptions to the sanctions on Russia, which would allow countries from outside the bloc to deal with sanctioned Russian entities, including banks and state companies such as Rosneft.
While ESPO is being sold below or close to benchmarks, Middle Eastern producers are selling their crude to Asia at record or near-record premiums for contracted term supply, while spot prices are also at premiums to Dubai/Oman.
For example, Saudi Arabia—the world’s top crude oil exporter—last week raised the official selling price of its crude oil to new highs for September loadings.
Russia’s share of the Indian oil market is growing at the expense of Saudi imports, with Russian oil selling at a sizeable discount to Saudi crude. Russia became the second-biggest oil supplier to India in June, after Iraq, which remained the biggest oil supplier to the subcontinent.
China and India, always sensitive to pricing and on the lookout for cheap supply, are buying spot Russian cargoes out of Russia’s Far East for lower prices.
“Russian oil is very popular among Asian refiners and at these prices it’s a great value,” a trading source told Reuters.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com