Alexey Belogoryev, Research and Development Director of the Institute for Energy and Finance, commented to RBC on the current dynamics of Russian ESPO oil prices and sales.
The main reason for the current dynamics lies in the high demand from Chinese refineries, Alexey Belogoryev explains. Moreover, we are talking about both independent refiners and, for example, the state-owned Sinopec. An additional incentive was the decrease in supplies of Arctic Russian varieties Novy Port, ARCO and Varandey to China this year.
"ESPO is the most sought—after Russian variety in China because of its high quality and, last but not least, its short transport way," Belogoryev argues. Currently, only India competes with China for the brand, but the transport costs of supplying this oil to the Indian market are higher and at current prices this grade is not attractive for the country's refineries. "The growth in demand for ESPO in India, observed this summer, was associated with sluggish consumption in China, which allowed for increased discounts. But with high demand in the Chinese market, interest in ESPO from India is sharply decreasing," the expert says.
Nevertheless, Belogoryev believes that the premium is unlikely to last long, including since its formation was influenced by relatively low freight rates and some sagging shipments.

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