Chinese Refiners Pay Record Premiums for Russian ESPO Crude

Chinese refiners are currently paying record premiums for ESPO crude from Russia, as they search for alternatives to Iranian imports that were previously sourced before the U.S. imposed a naval blockade. ESPO crude, which is transported from Russia's Far East coast, is currently trading at a premium of over $7 per barrel, with offers reaching up to $10 per barrel over Brent crude, according to Bloomberg.

This blend is particularly popular in China, which accounts for 83% of ESPO crude imports during the first seven months of the year, down from 88% a year ago. However, Indian refiners have increased their ESPO imports from 12% to 16% of their Far Eastern Russian crude blend during the same period. The rise in Indian demand is due to a decline in overall Chinese oil imports during May and June and supply disruptions in the Middle East, which delayed many term cargoes that Indian refiners were expecting in early summer.

While Indian refiners usually prefer the Urals blend, they have started to adopt ESPO as a reliable backup option in times of disruption, despite its longer transit time and higher cost. India's crude oil imports from Russia, however, are believed to have dropped in August from July's record high due to Ukrainian attacks on Russian export infrastructure and competition from China for Russia's barrels.