The ARGUS crude delivered to Shandong price assessments
Asia-Pacific’s first spot market for crude has emerged in China after the government removed import restrictions for crude refiners in 2015. Shandong, the destination for over a third of all Chinese crude imports, now clears around 1mn b/d of spot crude trade. Shandong boasts 3.7mn b/d of independent sector refining capacity, over 200mn bl of commercial crude storage tanks, six terminals capable of receiving very large crude carriers, and produces nearly 500,000 b/d of crude.
Argus assesses the four most-traded crude grades on Shandong's spot market. This allows traders, producers, refiners and other market participants to shift from fixed-price deals to floating price trading that is more representative of market value.
- Argus is the first, and so far only, independent price reporting agency to produce crude assessments for the Shandong market.
- Argus delivered ex-ship (des) Shandong assessments provide the first region-specific price signal for import-dependent Asia-Pacific and are a new indexation opportunity for crude sales to China, the world’s biggest import market. Crude price formation has traditionally taken place close to the point of production in the North Sea, the Mideast Gulf and the US Gulf.
- Shandong spot prices are transaction-based assessments expressed as differentials to front-month Ice Brent futures for the month of delivery. Separately, Argus publishes net-forward calculated prices for selected grades delivered to Singapore and Ningbo, China, based on fob prices plus freight.
Des Shandong trade flows
Des Shandong Lula
Two-thirds of Brazilian crude exports are shipped to China, half of which end up in Shandong. The Argus des Shandong Lula assessment provides the first-ever market assessment for Brazil’s largest export stream that does not price at the point of loading. The des Lula assessment gives producers, traders and refiners an option to shift to floating price indexation from fixed-price trades in a volatile market environment. Argus’ highly-liquid des Lula assessment also provides market participants a much-needed reference price for the settlement of swaps contracts.
Des Shandong ESPO Blend
The Argus des Shandong ESPO Blend assessment complements Argus’ successful fob Kozmino assessment for Russia’s core export grade to Asia-Pacific, giving market participants price visibility down the supply chain. China is the main market for ESPO Blend, and the des Shandong market trades ESPO Blend all month-round.
Des Shandong Djeno
The Argus des Shandong Djeno assessment provides buyers and sellers with a reference price for sales of all west African grades to northeast Asia, simplifying the process of agreeing term contracts for buyers and sellers. Most west African crude exports head to Asia-Pacific, where Congolese Djeno has emerged as the most-liquid traded grade in a fragmented delivered market.
Des Shandong Oman
Oman is the only significant non-Opec producer in the Mideast Gulf, exporting over 200,000 b/d to Shandong province. Argus’ des Shandong Oman assessment gives a vital indication of the value of sour crude traded to China, and the marginal price for competing grades such as Russian Urals. Spreads between the Argus des Oman and des ESPO Blend assessments give a geographically precise measure of the relative value of sweet and sour crude in northeast Asia. In contrast, the international Brent-Dubai EFS — the premium of Ice Brent crude futures to Dubai swaps — can spike or collapse in response to changes in supply in the North Sea or from Opec producer countries. The delivery period of Argus’ des Oman assessment aligns with the front-month sour crude futures contract on Shanghai-based energy exchange INE, where the bulk of INE liquidity occurs.
Where to find these assessments
These four des Shandong price assessments are published daily in our Argus Crude service, where you can also find news and analysis for over 80 different internationally-traded crude streams.
Argus China Petroleum
The Argus China Petroleum service offers in-depth daily coverage of oil markets in China and includes over 30 sets of key data tracking prices and supply and demand fundamentals, as well as a monthly report analyzing market developments.