Bloomberg News

ESPO Premiums Drop Further; Market Awaits Saudi March Prices

February 02, 2012

Feb. 1 (Bloomberg) -- Russia’s ESPO crude for late-March sold at lower premiums than earlier cargoes, reflecting declining refinery demand before Saudi Arabia’s posts official selling prices.

The largest producer in the Organization of Petroleum Exporting Countries is scheduled to release price formulas on Feb. 5 for barrels bought in March. The state-owned oil company known as Saudi Aramco is expected to lower price differentials for customers in Asia, according to a poll of eight crude buyers in China, India, Japan, Singapore and South Korea.

Russia’s TNK-BP sold two 100,000-metric ton cargoes of East Siberian Pacific Ocean crude, or ESPO, for loading in March to Statoil ASA and Royal Dutch Shell Plc, according to three traders who participate in the market, declining to be identified because the information is confidential.

The cargoes, loading March 13-16 and March 18-23, were sold at a premium of around $5.50 to $6 a barrel to benchmark Dubai prices. That is lower than the $6.30 that March 1-10 cargoes sold for in January. Russia’s ESPO is similar to Middle East grades and competes for buyers in Asia. In December, OAO Rosneft, Russia’s largest oil producer, sold an ESPO cargo for February at a premium as high as $7 a barrel.

Rosneft has offered to sell 100,000 metric tons of ESPO for loading March 27-30, according to tender document obtained by Bloomberg News. Bids are due Feb. 2.

Mideast Crudes

Mideast crude grades were unchanged today after falling during the past four weeks to the lowest level since August 2009. Abu Dhabi’s Murban crude is assessed at 60 cents below its official selling price. It was at a discount of 8 cents on Jan. 10. Qatar Marine and Upper Zakum are at discounts of 85 cents and 50 cents to its official levels, the lowest in more than two years, according to data compiled by Bloomberg.

Dubai crude’s backwardation, when the price for deliveries now is greater than for shipments later, widened by 2 cents. Swaps for February were 95 cents a barrel more than April, according to data from PVM Oil Associates Ltd., a London-based broker. The price difference, known as a timespread, has fallen 60 percent since Jan. 13, implying weaker oil demand.

The exchange for swaps for March, which measures North Sea Brent crude’s premium over Dubai, fell 5 cents to $2.77 a barrel today.

--Editors: Christian Schmollinger, Mike Anderson

To contact the reporter on this story: Ramsey Al-Rikabi in Singapore at ralrikabi@bloomberg.net

To contact the editor responsible for this story: Mike Anderson at manderson34@bloomberg.net


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