Rising Chinese demand puts ESPO Blend at a premium to Brent

ESPO Blend oil, from Russia's Far East, has seen its price rise due to strong Chinese demand, crowding out Indian buyers.

Share:

Gain full professional access to energynews.pro from 4.90€/month.
Designed for decision-makers, with no long-term commitment.

Over 30,000 articles published since 2021.
150 new market analyses every week to decode global energy trends.

Monthly Digital PRO PASS

Immediate Access
4.90€/month*

No commitment – cancel anytime, activation in 2 minutes.

*Special launch offer: 1st month at the indicated price, then 14.90 €/month, no long-term commitment.

Annual Digital PRO Pass

Full Annual Access
99€/year*

To access all of energynews.pro without any limits

*Introductory annual price for year one, automatically renewed at 149.00 €/year from the second year.

ESPO Blend, a crude oil of Russian origin extracted from the Far East, is experiencing a significant rise in price, reaching a premium over Brent for the first time since November 2023.
This increase is directly linked to a recovery in demand from Chinese refineries. Cargoes destined for China in November are now trading at a premium of between $0.20 and $0.50 per barrel, depending on the terms of the agreement and delivery dates, according to several market sources.
The increase comes after a period when ESPO Blend was sold at a discount, facilitating purchases by Indian refiners.
The main attraction of ESPO Blend for Chinese refiners lies in its geographical proximity, which reduces transport costs, and its composition, which is suited to the production of petroleum products in demand in Asia.
However, recent market fluctuations, marked by sluggish Chinese demand in the middle of the year, had enabled India to temporarily fill the gap, increasing its purchases.
This change in situation shows just how sensitive the Asian oil market is to adjustments in demand from the main regional players.

Chinese refineries: key players in demand

Chinese refineries, especially the independent “teapots”, are major buyers of ESPO Blend, attracted by its quality and low logistics costs.
The return of Chinese demand has been amplified by the entry into production of new capacities.
For example, Yulong Petrochemical, a recently commissioned private refinery, launched a new 200,000-barrel-per-day processing unit in September 2024.
Even before its start-up, the company had already built up significant stocks of Russian oil, helping to keep pressure on prices.
China’s major oil companies are also increasing their purchases.
Unipec, Sinopec’s trading arm, has secured around 10 cargoes of ESPO Blend for delivery in October, according to a trading source based in Shandong province.
This sustained demand from the big players in the Chinese market leaves fewer opportunities for smaller, independent refineries, which are struggling to keep up with the pace imposed by these industry giants.

Logistics costs at the heart of transactions

Low transportation costs remain a key factor in Chinese refineries’ interest in ESPO Blend.
Freight for a trip to China remains competitive, costing around $1.35 million in September 2024, according to data from Simpson Spence Young.
This logistical economy makes ESPO Blend particularly attractive to refineries, especially as global energy costs remain volatile.
On the other hand, Indian refineries, which took advantage of the summer price drop to increase their purchases, are no longer prepared to pay current prices.
The additional cost of transport to India, combined with the premium charged for ESPO Blend, makes this oil less attractive to Indian refiners, who are now looking for alternatives from West Africa.
India, which has been one of the main importers of Russian oil since the introduction of international sanctions against Moscow, thus favors other grades of crude, notably Urals, which is richer in diesel.

A dynamic, constantly evolving market

The recent upturn in Chinese demand for ESPO Blend demonstrates how quickly market dynamics can change, influenced by the supply strategies of major players.
China, with its growing appetite for crude oil, continues to dictate regional trends, forcing other importing countries to adapt to these developments.
India, although a major consumer of Russian crude, is now having to adjust its supply strategies in the face of less favorable market conditions.
The ramp-up of new refining capacity in China, combined with stable logistics costs, should keep demand for ESPO Blend at high levels in the months ahead.
However, market players will be keeping a close eye on price trends, as any further fluctuations could once again reshuffle the cards in the Asian oil industry.

The United Kingdom is set to replace the Energy Profits Levy with a new fiscal mechanism, caught between fairness and simplicity, as the British Continental Shelf continues to decline.
The Italian government is demanding assurances on fuel supply security before approving the sale of Italiana Petroli to Azerbaijan's state-owned energy group SOCAR, as negotiations continue.
The Dangote complex has halted its main gasoline unit for an estimated two to three months, disrupting its initial exports to the United States.
Rosneft Germany announces the resumption of oil deliveries to the PCK refinery, following repairs to the Druzhba pipeline hit by a drone strike in Russia that disrupted Kazakh supply.
CNOOC has launched production at the Wenchang 16-2 field in the South China Sea, supported by 15 development wells and targeting a plateau of 11,200 barrels of oil equivalent per day by 2027.
Viridien and TGS have started a new 3D multi-client seismic survey in Brazil’s Barreirinhas Basin, an offshore zone still unexplored but viewed as strategic for oil exploration.
Taiwan accuses China of illegally installing twelve oil structures in the South China Sea, fuelling tensions over disputed territorial sovereignty.
Chevron has reached a preliminary agreement with Angola’s national hydrocarbons agency to explore block 33/24, located in deep waters near already productive zones.
India increased its purchases of Russian oil and petroleum products by 15% over six months, despite new US trade sanctions targeting these transactions.
Indonesia will finalise a free trade agreement with the Eurasian Economic Union by year-end, paving the way for expanded energy projects with Russia, including refining and natural gas.
Diamondback Energy announced the sale of its 27.5% stake in EPIC Crude Holdings to Plains All American Pipeline for $500 million in cash, with a potential deferred payment of $96 million.
Reconnaissance Energy Africa continues drilling its Kavango West 1X exploration well with plans to enter the Otavi reservoir in October and reach total depth by the end of November.
TotalEnergies has signed a production sharing agreement with South Atlantic Petroleum for two offshore exploration permits in Nigeria, covering a 2,000 square kilometre area with significant geological potential.
Nigeria’s Dangote refinery shipped 300,000 barrels of gasoline to the United States in late August, opening a new commercial route for its fuel exports.
Saudi and Iraqi exporters halted supplies to Nayara Energy, forcing the Rosneft-controlled Indian refiner to rely solely on Russian crude in August.
BW Offshore has been chosen by Equinor to supply the FPSO unit for Canada’s Bay du Nord project, marking a key milestone in the advancement of this deepwater oil development.
Heirs Energies doubled production at the OML 17 block in one hundred days and aims to reach 100,000 barrels per day, reinforcing its investment strategy in Nigeria’s mature oil assets.
Budapest plans to complete a new oil link with Belgrade by 2027, despite risks of dependency on Russian flows amid ongoing strikes on infrastructure.
TotalEnergies and its partners have received a new oil exploration permit off Pointe-Noire, strengthening their presence in Congolese waters and their strategy of optimising existing infrastructure.
India’s oil minister says Russian crude imports comply with international norms, as the United States and European Union impose new sanctions.

Log in to read this article

You'll also have access to a selection of our best content.