Russia: ESPO oil prices fall sharply as Chinese refineries tighten imports

(PetroTimes) - The price of Russian ESPO crude, the main crude exported from the Far East, has fallen to its lowest level since June 2024 and turned lower than the international benchmark due to weak demand from Chinese state-owned companies.

Photo: EnergyIntel
According to Reuters sources, ESPO crude oil cargoes for April delivery are currently trading at a discount of about $1.50 a barrel to ICE Brent for delivery to China.

The discount is the first in 10 months, compared with a discount of about $2 a barrel to ICE Brent that ESPO crude was sold to in China for March delivery, according to Reuters data.

The weaker demand from China comes as China’s major state-owned oil companies and refiners have reduced or stopped buying Russian crude, avoiding sanctioned vessels and cargoes.

State-owned companies began shunning Russian crude in March and this has continued for April and early May cargoes, according to traders who spoke to Reuters.

While China’s state-owned oil companies have halted or reduced Russian oil volumes, at least for now, private refiners in China are picking up the slack.

China’s major oil companies have taken a more cautious approach to Russian grades following the US sanctions, Emma Li, senior market analyst at Vortexa, wrote in an analysis earlier this month.

“Even when shipped on non-sanctioned tankers, China’s ESPO Blend purchases have been limited. Market sources say some state-owned companies have completely stopped buying Russian crude in March after scaling back in February,” Li added.

Private refiners, for their part, have ramped up ESPO purchases, with many February loadings destined for Shandong and Jiangsu provinces, Vortexa estimates.

In January, private refiners preferred to cut capacity rather than seek alternative barrels amid uncertainty over ESPO supply, Li noted.

Binh An (Petrotimes.vn)