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Prices of November ESPO blend oil fall as Chinese refiners exhaust their import quotas

Three traders said that the premiums for Russia's ESPO blend crude oil loaded from Kozmino have fallen for November-loadings because independent Chinese refiners - key buyers of this grade - are facing dwindling import quotas.

Traders said that cargoes due to be loaded from the Far Eastern Port of Kozmino, in November, were sold for a premium of about $1.70 per barrelle to ICE Brent, on a delivery-basis to Chinese ports. This is down from around $2 per barrelle at October levels.

Independent refiners in China are subject to a strict quota-based system. State-run refiners like Sinopec PetroChina and CNOOC, which are dominant in the industry, are exempted from these limits. However, independent refineries and four large integrated refiners, known as teapots, rely on government issued quotas for foreign crude.

The independent refiners are responsible for over one-third (33%) of China's total crude oil imports. Their purchasing power is a major driver for the demand for Russian grades.

In the last few weeks, traders have reported that import quotas are running out. Sources at two independent factories said that they had applied for new permits but hadn't heard when they would be released.

A small number of permits have been requested by refineries for 2026. The same permits were issued a year ago, in November 2024.

One trader who deals in Russian oil noted that the competition is increasing.

Traders said that the demand for Russian oil is still strong. This includes Urals, Sakhalin, and Arctic blends.

The December ESPO blend oil cargoes have just begun trading and traders say that low import quotas could weigh heavily on the prices.

Terminal operators at a major oil terminal in the east China province of Shandong are planning to implement measures to prohibit shadow fleet vessels, and to limit visits from other old tanks. This will further complicate Russian oil sales.

The freight rates for Russian oil shipping to Chinese ports from Kozmino remained at $2-$3 million per one-way Aframax tanker trip. Reporting by reporters from MOSCOW, Siyi Liu, and Aizhu Chan in SINGAPORE. Editing by Elaine Hardcastle.

(source: Reuters)