Trade for March-loading Russian oil exports, particularly the ESPO Blend crude, has come to a halt in Asia, driven by a widening price gap between buyers and sellers.
The price disparity became evident in China after the cost of chartering tankers, which remain unaffected by U.S. sanctions, surged.
According to traders and shipping data, the hike in tanker freight rates has resulted from Washington’s sanctions imposed on January 10, targeting Russia’s oil supply chain.
These sanctions have pushed freight rates for some tankers to skyrocket, with some buyers and ports in China and India opting to avoid vessels that are sanctioned.
Price Surge in ESPO Blend Crude Offers
Following the imposition of the sanctions, offers for March Russian ESPO Blend crude, exported from the Pacific port of Kozmino, saw significant increases.
Premiums rose to between $3 and $5 per barrel over ICE Brent on a delivered ex-ship (DES) basis to China.
Traders familiar with the grade explained that the surge in premiums is largely due to freight rates for Aframax tankers. These rates on the route soared by several million dollars.
Before the January sanctions, strong winter demand and rising prices for competing Iranian grades had already driven up spot premiums for ESPO Blend crude to China. These premiums reached nearly $2 a barrel.
This was the highest level since the Ukraine war began in 2022. During this period, ESPO Blend crude prices had plunged to discounts of up to $6.
Impact on Russian Crude Exports to Asia
Russian crude, including ESPO Blend, makes up a significant share of Asian oil imports. In 2024, it accounts for 36% of India’s oil imports. Nearly 20% of China’s oil imports also come from Russian crude.
The latest sanctions specifically target tankers carrying about 42% of Russia’s seaborne oil exports, which are primarily directed to China.
Although many of these sanctioned tankers are still discharging oil in China and India, they are operating under a waiver period.
Clarification for Indian Buyers
The U.S. has provided additional clarity for Indian buyers. It stated that tankers loaded with Russian oil must discharge their cargo by February 27 under the terms of the sanctions.
As reported by reuters.com, the deadline further complicates the situation. Traders and buyers in both countries must navigate the evolving landscape of sanctions and rising shipping costs.
