Premiums for Russia’s ESPO Blend crude oil loading from Kozmino port weakened for November-loading cargoes as independent Chinese refiners, key buyers of the grade, face dwindling import quotas, three traders told Reuters.
Cargoes scheduled to load from the Far Eastern port of Kozmino in November were sold at a premium of around $1.70 per barrel to ICE Brent on a delivery basis to Chinese ports, down from about $2 per barrel for October levels, traders said.
China has a strict quota system for crude imports by independent refiners. While dominant state-run refiners such as Sinopec, PetroChina and CNOOC are exempt from these limits, smaller independent plants – known as “teapots” – and four large integrated refiners rely on government-issued quotas to secure foreign crude.
These independent refiners account for more than one-third of China’s total crude imports, making their purchasing power a key driver of demand for Russian grades.
Traders have said in the past few weeks that import quotas were depleting and sources at two independent plants told Reuters that they applied for new quotas but had not heard when new permits would be released.
Refineries have applied for a small batch of advance permits for 2026. Similar permits a year earlier were released in late November 2024.
"As Chinese refiners don’t have many import quotas left, they are picking between cheaper alternatives," said one trader involved in Russian oil sales, noting that competition was rising.
Refiners' demand for Russian oil remains strong, not only for ESPO: significant volumes of other Russian grades have also been purchased this autumn, including Urals, Sakhalin and Arctic blends, traders said.
December ESPO Blend oil cargoes trading has just started and low import quotas may weigh heavily on prices, traders said.
Terminal operators in a major oil port in east China's Shandong province are set to introduce measures to ban "shadow fleet" vessels and curb visits by other old tankers further complicating Russian oil sales.
Freight rates for Russian oil shipping from Kozmino to Chinese ports remained stable at $2 million–$3 million for a one-way trip on an Aframax tanker.
(Reporting by Reuters reporters in MOSCOW, Siyi Liu and Aizhu Chen in SINGAPORE;Editing by Elaine Hardcastle)