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Russia Is Selling Crude Oil To Asia Above The $60 Price Cap

Russia’s ESPO grade, the crude from Russia’s Far East, is selling in Asia above the $60 price cap as it appears that Russia is currently handling the short Russian Far East-China route with Russian tankers and insurance, traders told Bloomberg on Friday.
Some independent refiners in China—the so-called teapots—have already placed orders for ESPO crude with January delivery of the grade, whose price was assessed at $67.11 per barrel on Thursday by Argus Media.
The price cap on Russian crude imposed by the EU, the G7, and Australia came into effect on Monday, but China hasn’t joined the so-called Price Cap Coalition, which bans maritime transportation services for Russian crude oil unless the oil is sold at or below $60 per barrel.
The trades with ESPO above the price cap suggest that, for now, Russia has the tankers and insurance firms to provide coverage and shipping for the ESPO grade, which can reach China from Russia’s Far East in less than a week.
Russia has used its own tankers to ship the ESPO crude and often provides insurance itself, according to traders who spoke to Bloomberg.
It appears to be business as usual for Chinese refiners, who continue to buy Russian crude and are ignoring the price cap imposed by Western countries. Due to tepid demand, however, China’s independent refiners are seeing the steepest discounts in months for Russia’s ESPO crude, traders told Reuters earlier this week.
At least one cargo of ESPO, which is preferred by China’s independent refiners, was sold last week at a discount of $6 per barrel to the February ICE Brent price on the delivery-ex-ship (DES) basis, traders familiar with the transaction told Reuters. At the current price of Brent Crude, this means that the ESPO cargo was sold at around $68 per barrel.  
While the ESPO crude is easier for Russia to move from its Far East to China, the price of Russia’s Urals grade, shipped from the Baltic port of Primorsk, was assessed at well below the price cap on Thursday, at just $41.59 per barrel according to Argus.  
By Tsvetana Paraskova for Oilprice.com

Dec 10, 2022 13:46
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