Weak Chinese demand drives rare flow of Russian ESPO oil to U.S. -sources

Mercuria Holdings

17/03/2021 09:47

* Mercuria, Chevron book tankers to ship ESPO crude to U.S.
    * ESPO crude last loaded for U.S. in July 2019 -Refinitiv
    * Muted China demand, low freight, wide EFS enable ESPO
arbitrage

    By Shu Zhang and Devika  Krishna Kumar
    SINGAPORE, March 17 (Reuters) - More than 3 million barrels
of Russian ESPO crude are heading to the United States after a
gap of over a year as muted demand from Chinese independent
refiners and low freight rates make the trade viable, according
to trade sources and Refinitiv data.
    Trading house Mercuria has provisionally chartered three
cargoes of ESPO Blend crude loading from Russia's Far East port
of Kozmino at the end of March to head to the United States,
Refinitiv shipping data showed.
    Oil major Chevron Corp  CVX.N  has also chartered one vessel
with nearly 1 million barrels of ESPO crude to depart from
Russia in late March, the data showed. 
    It will take half a month for the ships to arrive at the
U.S. west coast.
    The United States last loaded an ESPO crude cargo in July
2019, a year in which it bought 2.44 million barrels of the
Russian grade, Refinitiv oil research data showed. 
    No ESPO crude traded to the United States in 2020.
    Spot premiums for ESPO crude  ESPO-DUB  have fallen on low
Chinese demand while low freight rates and a wider price spread
between Brent and Dubai benchmarks  DUB-EFS  improved arbitrage
economics, traders told Reuters.   
    The Brent/Dubai Exchange of Futures for Swaps (EFS) has been
hovering around $3 since last week, its highest since November
2019.  DUB-EFS-1M     
    Two of the ESPO Blend cargoes were to buyers Marathon
Petroleum Corp  MPC.N  and Chevron on the U.S. west coast, trade
sources said. The cargoes were priced at about $1.50 above Dubai
quotes, one of the sources said. 
    Oil companies typically do not comment on their trades.
    Russian ESPO is usually a China-focused grade popular among
independent refiners in the oil refining hub of Shandong, thanks
to its geographic proximity, requiring only three or four days
of shipping.
    But the independent refiners' crude purchases have been slow
over the past weeks, partly because of an increase in cheap
Iranian oil inflows.  urn:newsml:reuters.com:*:nL4N2KH0L1 urn:newsml:reuters.com:*:nL1N2KW0OG
    "Teapot demand has been covered by these (sanctioned oil),"
said one of the traders who supply to the China market.
    More than 10 independent refiners plan to shut for
maintenance between March and June.
    "Teapot maintenance has gradually started in March and is
most concentrated in May and June. The expected run rate will be
as low as 60% to 65% overall," said Zhou Guoxia, an analyst at
local consultancy JLC.
 VESSEL         Volume       Departure  Arrival   Charterer
 NEVERLAND      740KB        2021/3/31  2021/4/1  Mercuria
 DREAM                                  5         
                                                  
 MONTE          740KB        2021/3/31  2021/4/1  Mercuria
 SERANTES                               5         
                                                  
 AQUALIBERTY    740KB        2021/3/31  2021/4/1  Mercuria
                                        5         
 PLUTO MOON     1,000KB      2021/3/23  2021/4/7  Chevron
 
    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Weak Chinese demand sparks rare Russian ESPO oil flows to the
U.S.    https://tmsnrt.rs/3vvP9BU
Weak ESPO premiums, widening Brent-Dubai spread spur rare ESPO
trades to the USA    https://tmsnrt.rs/3cFeHnF
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Shu Zhang and Florence Tan in Singapore, Devika
Krishna Kumar in New York; Editing by Clarence Fernandez)
 ((shu.zhang@thomsonreuters.com; +65-6870-3549; Reuters
Messaging: Twitter @shuzhang4))