Russia's Far East ESPO Blend crude for October delivery to China is trading at premiums of up to $1 a barrel to ICE Brent, supported by strong Chinese demand and uncertainty over oil supplies from the Middle East and Iran, four traders said.
Asian buyers are seeking alternatives to Middle Eastern crude amid concerns that shipments through the Strait of Hormuz will remain disrupted, the traders said.
Oil prices rose on Monday as diplomatic efforts to resolve the Middle East conflict showed little progress, although the absence of major supply disruptions limited gains.
"Not sure how long the Mideast crisis going to last and how much Iran oil will ship out, so Russian supply is the most reliable one," one of the traders said.
ESPO Blend cargoes for October delivery have traded actively, with nearly all volumes sold to buyers at around a $1-a-barrel premium to ICE Brent on a delivered basis into Chinese ports, the traders said.
That compares with September-delivery cargoes, which traded from a $1-a-barrel discount to parity with ICE Brent last month. The last time ESPO Blend traded at a premium to Brent was in June.
Strong demand from Chinese refiners has sidelined another major buyer of Russian oil, India, two of the traders said. Indian refiners were unable to secure October ESPO allocations because Chinese buyers snapped up all available cargoes, they added.
Both China's independent refiners and major state-owned oil companies have been active buyers of ESPO Blend cargoes, traders said.
(Reporting by Siyi Liu and Aizhu Chen in SINGAPORE, Reuters reporters in MOSCOW, additional reporting by Nidhi Verma in NEW DELHI. Editing by Mark Potter)
