Russian ESPO Oil Price Exceeds $120 Per Barrel as Supply Tightens Globally
Global Factors Driving the Surge in Russian ESPO Oil Prices
Impact of Middle Eastern Supply Disruptions
MOSCOW/SINGAPORE, Sept 18 (Reuters) - Russia's ESPO Blend oil jumped above $120 per barrel for the first time since April, boosted by demand from Chinese refiners as the U.S.-Israeli war on Iran disrupts Middle Eastern supplies, three traders said and Reuters calculations showed.
China has increased its purchases of Russian oil as disruptions, especially of Saudi Arabian crude, threatened to leave Chinese refineries short of feedstock prior to the winter season when demand for heating fuel increases.
US Legislative Actions and Their Potential Effects
US lawmakers on Thursday approved legislation allowing President Donald Trump to approve tariffs on Russian oil purchases as the US seeks to limit Russia's ability to finance the war in Ukraine.
The measure could hamper Russian oil supplies to India and China, although many traders say it could lead to a further spike in oil prices, potentially boosting Russian earnings from oil.
Resurgence of Global Oil Prices
Globally oil prices have resurged in response to an upsurge in unrest in the Middle East.
Premiums to Benchmark Brent Reach Record Highs
PREMIUMS TO BENCHMARK BRENT REACH RECORD HIGHS
While the outright price of ESPO is at its highest since the early weeks of the Iran war, which began at the end of February, the premium for ESPO Blend oil to ICE Brent, used as a trading benchmark to price physical cargoes, has reached records of $20 to $30 a barrel, Reuters analysis of data showed.
Urals oil prices have also reached $110 per barrel this week.
The extent of the premium varies depending on each cargo and the delivery time.
Chinese Refiners and Shifting Market Dynamics
Advance Purchases and Supply Tightness
Chinese refiners typically purchase ESPO one or two months in advance as the shipping distance from Russia's Far East is short, but market concerns about tight supplies led buyers to lock in December-loading programs early.
Chinese state-owned energy firms led the buying and secured the bulk of November and December volumes.
Impact on Independent Refiners
This left little supply for small independent refiners, known as teapots, that are historically the grade's main buyers, forcing them to turn to other spot markets worldwide and adding upward pressure to global prices.
(Reporting by Reuters in MOSCOW, Siyi Liu in SINGAPORE; editing by Barbara Lewis)
