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Thursday, September 28, 2023

China Buying Russian Oil Above Price Cap – Bloomberg

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Russia’s ESPO crude from the Far East is being sold above the Western-imposed $60 per barrel price cap in Asia, Bloomberg reported on Friday, concluding that Moscow might be using its own tankers and insurance to bypass sanctions.

The export price for ESPO grade for January deliveries was estimated at $67.11 by independent price information provider Argus Media on Thursday, and a number of China’s independent refiners that have already booked oil cargos for that month.

The price cap on Russian seaborne oil exports of $60 per barrel was introduced by the EU, G7 nations and Australia on December 5. It bans Western companies from providing insurance and other services to shipments of Russian oil, unless the cargo is purchased at or below the set price.

Traders familiar with the matter told Bloomberg that sales of ESPO crude above the price ceiling could mean that Russia is providing tankers and insurance itself for shipments which can be delivered from the Far East to China within days.

China, Russia’s top oil buyer, has not signed up to the price cap, with traders saying they are doing business as usual.

Independent refiners are dominant customers of the ESPO grade and “don’t really care about the price cap. All they do is crunch the numbers to see if the delivered prices make good profit or not,” a trading executive from an unnamed independent refinery told Reuters earlier this week.

At least one December-arrival ESPO cargo was sold to an independent refiner at a discount of $6 per barrel against the February ICE Brent price on the delivery-ex-ship (DES) basis, Reuters reported, citing traders familiar with the deal. At the current price of Brent crude, this means the ESPO cargo was sold at about $68 per barrel.

In October, media reported that Russian oil major Rosneft was expanding its tanker chartering business, in a bid to help customers in regions not subject to sanctions receive oil supplies without delays, after the EU embargo comes into force. Reports said customers were asking Rosneft to ensure delivery to the final destination and cover insurance and freight expenses.

Russia has repeatedly said it will not sell oil to countries that support the price cap.

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