Russian ESPO crude premiums slide

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.

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 $6.50-$7 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 $1 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 $7.60 and about $7.80 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 $3.11 a barrel, down from 200 yuan per tonne, or $3.89 a barrel, in October, according to data from Wang Zhao, an analyst at Sublime China Information Co.

Premiums for ESPO crude rose to a record of as much as about $9 a barrel above Dubai quotes in October for some December-loading cargoes.

(1 tonne=7.3 barrels for crude conversion) ($1 = 7.0383 Chinese yuan)

Reporting By Shu Zhang and Florence Tan, Additional Reporting by Muyu Xu in Beijing; Editing by Christian Schmollinger

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