ESPO crude differential rebounds on deferred buying; outpaces Mideast complex
Singapore (Platts)--29Nov2012/436 am EST/936 GMT
The spot differential of ESPO crude has rebounded since the middle of
November -- when trading moves from December-loading cargoes to January
parcels -- outpacing the Middle Eastern crude complex, Platts data showed.
ESPO crude loading 45-75 days forward was assessed at Dubai crude
assessments plus $4.30/barrel at the Asian close Wednesday, with the
differential gaining $1.32/b since November 16.
In comparison, spot differentials of Middle Eastern crude benchmarks
Dubai and Oman -- also priced off Dubai crude assessments -- fell 44 cents/b
and 49 cents/b, respectively, over the same period to both close at Dubai
crude plus $1.78/b Wednesday.
Traders attributed the recent gains in the ESPO spot differential to
deferred purchasing by most Northeast Asian refiners and oil majors, that
make up the bulk of ESPO demand.
"Most refiners [in Northeast Asia] and oil majors would choose to keep
December entitlements low for tax purposes," said a trader with a Western
trading house. "If they deferred purchases last month [for December-loading
cargoes], they will have to make up for it this month."
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A crude oil trader with a Japanese refiner echoed similar sentiments.
"I heard companies with their financial year-end in December postponed
their purchases and restarted buying for January-loading cargoes; that's why
demand for January-loading ESPO is high," he said.
Market sources also said that while winter demand for middle
distillate-rich crude grades has helped to support the ESPO differential to
some extent, some Northeast Asian refiners have also chosen to replace sour
crudes such as Dubai or Oman for ESPO.
"Before the sour crude complex softened, Dubai and Oman were looking
'expensive', which possibly prompted buyers to look towards alternatives such
as ESPO," one ESPO trader said, referring to the slide in Dubai and Oman
differentials after November 16.
Dubai and Oman were both assessed at Dubai crude plus $2.73/b on
November 16 -- a high for this month so far -- up 51 cents/b and 46 cents/b,
respectively, since the start of November.
In comparison, the differential for ESPO crude -- loading 45-75 days
forward -- fell 45 cents/b to finish at Dubai crude plus $2.98/b on November
16 -- a period during which mainly December-loading parcels of the grade were
"Given that the relative differential between ESPO and Oman should be
about $1-1.50/b, ESPO definitely looked more attractive [at the time]," a
trader with an European oil company said.
Russia is set to export 18 cargoes, each 100,000 mt, of ESPO crude from
Kozmino in its January loading program, unchanged from December, Platts
reported earlier this week.
--Gabriel Yip, firstname.lastname@example.org
--Edited by Deepa Vijiyasingam, email@example.com