Russian oil is being paid more, thanks to demand from China and India

Russian crude oil is recently paid better than in score weeks. Russia's ESPO crude blend shipped to Asia recently saw spot negotiations on par with Middle Eastern benchmarks, a sign that the degree of export Russia ships from its Far Eastern port, Kozmino, is recovering in terms of prices thanks to to the high demand from major buyers in Russia, China and India.

At least two cargoes in the next two months were sold at ESPO prices on par with the Dubai benchmark, commercial sources told Reuters Monday.

In the first weeks of the Russian invasion of Ukraine, the ESPO collapsed at a whopping $ 20 a barrel off regional benchmarks as traders and companies were confused by potential sanctions on Russian oil shipments.

Prices have recovered from those lows, at least for some cargoes, as India and China continue to buy Russian oil. Furthermore, the EU recently decided to add exemptions to sanctions against Russia, allowing countries outside the bloc to deal with sanctioned Russian entities, including banks and state-owned companies such as Rosneft.

While ESPO is being sold below or close to benchmarks, Middle Eastern producers are selling their crude to Asia at or near record premiums for contracted forward supplies, while spot prices are also at a premium to Dubai / Oman. So there remains a difference between the prices obtained by Russia and those in the Middle East.

For example, Saudi Arabia, the world's leading crude oil exporter, raised its crude oil official selling price to new highs for September cargoes last week.

Russia's share of the Indian oil market is growing at the expense of Saudi imports, with Russian oil being sold at a substantial discount to Saudi crude. In June, Russia became India's second largest oil supplier, after Iraq, which remained the subcontinent's largest oil supplier.

China and India, always price sensitive and looking for cheap supplies, are buying Russian spot cargoes from the Russian Far East at lower prices. However, this involves an increase in purchases, and therefore an increase in the price, or a decrease in the spread with Middle Eastern oil. It is the beauty merchant!

"Russian oil is very popular with Asian refiners and at these prices it is very affordable," a commercial source told Reuters.

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