MOSCOW (MRC) -- Premiums for January-loading ESPO Blend crude oil have dropped after rising to a record last month as Chinese refineries cut purchases before the Lunar New Year holidays and as refining margins fell, several trade sources said, as per Hydrocarbonprocessing.
The drop in spot premiums for Russian ESPO ESPO-DUB, one of the most popular crude grades for Chinese independent oil refiners, also known as “teapots”, could signal softer demand for other types such as Brazil’s Lula and Angolan crude.
Russian oil producer Surgutneftegaz sold late on Wednesday two 740,000-barrel ESPO cargoes, loading over Jan. 8-15 and Jan. 11-18, at premiums of around $6.60-$6.90 a barrel to Dubai quotes, the sources said.
Russia’s Paramount Energy also sold about four cargoes of January-loading ESPO crude at premiums of around USD6.50-USD7 a barrel to Dubai quotes, with the late-January loading cargoes sold at the lower end of the price range, the sources said. The buyers of the cargoes are not immediately known.
The premiums are nearly USD1 a barrel lower than a Surgutneftegaz ESPO tender awarded on Monday for cargoes loading on Dec. 31-Jan. 5 and Jan. 4-9, which were sold at about USD7.60 and about USD7.80 a barrel.
Some traders attributed the falling ESPO spot premiums to weak Chinese crude demand as cargoes loading in mid-and late-January from Russian’s Kozmino port will arrive in China close to the Lunar New Year holiday starting on Jan. 24 when the country winds down economic activity.
Crude purchases from China, the world’s top oil importer, are also declining because of falling refining margins. In November margins for plants across the country averaged about 160 yuan per tonne, or USD3.11 a barrel, down from 200 yuan per tonne, or USD3.89 a barrel, in October, according to data from Wang Zhao, an analyst at Sublime China Information Co.
As MRC informed earlier, Kazakhstan plans to increase the transit of Russian oil to China by 30 percent after 2023. Russia’s Rosneft currently sends 10 million tons of oil annually to China through Kazakhstan under a deal which will last until 2023. Some of Rosneft’s oil is consumed by a Kazakh refinery and replaced under a swap arrangement.
We remind that, Russia's output of chemical products rose in October 2019 by 5.4% month on month.
However, production of basic chemicals increased by 3.9% in the first ten months of 2019. According to the Federal State Statistics Service of the Russian Federation, the largest increase in production volumes on an annualized basis accounted for mineral fertilizers and polymers in primary form. Thus, 210 ,000 tonnes of ethylene were produced in October, compared to 200,000 tonnes a month earlier. Limited production was a result of scheduled shutdowns of several large producers in September-October.