Chinese demand revival perks up Russian ESPO premiums

A pickup in buying activity from Chinese independents saw spot market quotes for Russia’s ESPO blend crude rise Wednesday in Asia, while spot differentials for other Dubai-linked crudes fell to new lows for the May trading cycle.

Offers for May-loading cargoes of ESPO were rising to $2/b against Platts front-month Dubai crude assessments, crude traders said Wednesday morning.

“The cheapest barrel available right now is ESPO and you see that premiums for it are rising. Now its being quoted Dubai plus $2s/b,” a source with a Chinese refinery said.

ESPO, a medium-sweet crude blend shipped from the far eastern Russian port of Kozmino, is a key favorite of North Asian crude refiners. The grade is priced against both Dubai and ICE Brent futures in the spot market, making it easy to compare against Middle East barrels that are also priced against Dubai.

In addition, a weaker Brent/Dubai EFS and surging freight costs for shipping crude from the Persian Gulf to Asia put ESPO at the frontline of Asian sour crude demand, with lower costs of shipping and quicker voyage times favoring the medium sour grade.

At 11 am in Singapore, the May Brent/Dubai Exchange Futures for Swaps spread fell to minus $3.37/b, continuing to touch new lows with each dip. The EFS was assessed at minus $3.09/b on Tuesday at the 0830 GMT Asian close.
BUYERS RETREAT AFTER TENDER

Buying activity for Middle East sour crude grades took a breather Wednesday morning in Asia, market participants reported.

Buyers were holding back to assess whether prices of these crudes may fall further, after a few initial spot market deals fetched deep discounts, traders said.

Qatar Petroleum’s Al-Shaheen tender was awarded at discounts averaging minus $3.07/b against front-month Dubai crude assessments, market sources reported.

Prices for Qatar Marine and Qatar Land — also offered in the same tender — had been lower, initial market talk around the tender indicated Wednesday morning.

“Qatar Land was lower [priced] than Qatar Marine,” said a trader, adding that the tender cargoes did not receive as many bids as are typically seen for such offers.

“Demand is very limited,” she added.

Specifics around the pricing on Qatar Land and Marine crudes offered in the tender was still emerging in the market Wednesday. Qatar Land, a light sour grade comparable to Murban, is typically priced at a premium to Qatar Marine, which is of medium-heavy quality.

Qatar Petroleum’s latest official selling prices for the two showed Qatar Land at a 25 cent/b premium to Marine.
DUBAI SPREADS STEADY

Intermonth spreads for benchmark Dubai crude futures held in a familiar range Wednesday morning, little changed from the values assessed at the 4:30 pm close in Asia Tuesday.

The April/May Dubai spread was pegged at minus $1.29/b at 11 am Wednesday, edging up from its assessed value of minus $1.32/b at Tuesday’s close.

Similarly, the May/June Dubai spread ticked up to minus $1.17/b Wednesday from its assessment at $1.20/b Tuesday.

The Dubai cash/futures spread sunk to a 4.5-year low at Tuesday’s close as buying interest for Middle East crudes failed to take off for the May cycle.

The May cash/futures spread was assessed at minus $2.92/b at 4:30 pm in Singapore Tuesday, down from minus $2.49/b assessed the day before.
Source: Platts