Russia has benefitted from the US sanctions on Iran, Venezuela, and tanker companies’ sanctions. The embargo on Chinese ships is the most profitable for the world’s number 2 oil producer since the soaring freight rates boosted record premiums for Russian crude as it takes shorter distances to arrive in North Asia.
Russia’s ESPO Blend crude’s spot premiums for December soared to an all-time high of about USD9/barrel to Dubai, as Surgutneftegaz sold at the price at spot tenders closed Wednesday and Thursday.
Russian Sokol crude also posted the highest level in five years of around USD9/barrel to Dubai as ExxonMobil Corp. sold at December-loading cargo at such level in a spot tender closed Thursday.
After the attacks on Saudi Arabia’s two key oil facilities in mid-September, demand for major Russian oil grades has been strong as spot crude from Saudi went up. Other than that, Asia refiners are processing more low-sulfur grades to meet shippers’ demand for cleaner fuels from 2020.
The US sanctions on Chinese shipping company COSCO has driven 3% of the global tankers to be off-limits as companies fear to violate U.S. sanctions against Iran and Venezuela.
Even when Saudi has gained back the majority of its output capacity at 11.3 million bpd and is to increase to 12 million bpd by the end of November, some traders are still doubtful that it would not take long to repair the crude processing plants.
An Asian refinery source commented, “There is still no insurance that the supply of Arab Light and Arab Extra Light would get back to normal. Several small refineries have to buy spot cargoes in advance to minimize the risk.”
