ESPO crude differentials soar on fresh buying from India, China

Cash differentials of Russia's ESPO Blend crude soared following fresh buying from India and Chinese major refiners, with the former heard seeking the Far East Russian grade following the expected production cuts for Urals crude.

Indian refiners have collectively bought seven Russian ESPO Blend cargoes for April loading, according to sources. India last imported three ESPO Blend cargoes in November, according to shipping data from Kpler.

India's renewed buying of ESPO Blend was largely attributed to the disruption in Urals crude, rather than any sharp increase in demand as Indian refiners are already maxing out their crude runs, according to a trade source.

A few Indian refiners had earlier sought Middle Eastern sour crude in the spot market in the week ended Feb. 24. But the rebound in the medium sour crude complex might have pushed the refiners to seek out alternative Russian grades, the same source said.

In China, state trading company Unipec bought four ESPO cargoes for April loading at a discount of around $5/b against the Platts Dubai assessment on an FOB basis, as it reemerged in the market since December, according to trade sources.

Hengli Petrochemical, which has not bought any ESPO cargoes in the past few years after commissioning, was also heard to have bought around four to five ESPO cargoes, sources said.

A few Sinopec refining sources told S&P Global Commodity Insights that they are interested in the low-priced Russian barrels.

"We are eager to take some, but may need to compete with other Sinopec refineries, as supply is limited while our buying interest is strong," a southern China-based refining source with Sinopec said.

A stronger demand has seen offers for April-delivery ESPO to China's independent teapot refiners in Shandong, with rise to discounts of around $7-$7.50/b against June ICE Brent futures on a DES basis, sources said.

These were up sharply from a last trade heard for April delivery at June ICE Brent futures minus $8.50/b, DES Shandong basis, by an independent refiner.

Another Dongying-based independent refiner bought two cargoes at a discount of around $8.30/b DES Feb. 24, while Unipec's purchase level was equivalent to a discount of above $8/b, DES Shandong basis, according to trade sources.

Platts, part of S&P Global, assessed the Kozmino-North China lumpsum freight at $2.1 million on Feb. 28. Lumpsum freight rate from Kozmino to east coast India was estimated by a trade source at $4 million, and at $4.5 million to west coast India.

Other Chinese independent refiners such as Wudi Xinyue and Jin'ao Petrochemical, have also started seeking cargoes for April.

"Fewer cargoes were made available for independent refineries, so they have to rush," an independent refinery source said.

Lesser ESPO loadings in Feb

Loadings of ESPO Blend crude from Kozmino eased to 33 shipments in February from 38 shipments in January, shipping data from Kpler showed March 1.

All February-loading cargoes, except one, were fixed for China, according to the data. The destination of the Auriga, which left Kozmino on Feb. 17, is tentatively pointed to Singapore.

Of the total February-loading shipments, 17 cargoes were discharged in China in February, bringing total ESPO deliveries into China to 32 Aframax-sized cargoes during the month, the data showed.

Moreover, 28 cargoes totaling 2.8 million mt have been discharged into China's Shandong and Tianjin ports in February for these independent refineries, compared with a record-high of 3.3 million mt in January discharged by the sector, Kpler shipping data showed.