Viewpoint: China to maintain grip on ESPO Blend crude

Spanish Market: Crude oil
28/12/18

Exports of Russian ESPO Blend crude to China will continue to rise in 2019 as other Asia-Pacific refiners turn to alternative light crudes.

China has been the biggest buyer of ESPO Blend in the past year, lifting 65-80pc of the monthly volumes exported from the Kozmino terminal in Russia's far east. Chinese buyers took almost the whole of the seaborne ESPO Blend programme in the fourth quarter of 2018, partly as a precaution against expected falls in Iranian and Venezuelan supplies. China took more than 620,000 b/d of the light grade that loaded at Kozmino in October and November, giving the country a record 96pc share of shipments from the terminal.

Chinese buying has surged in the last few months on concerns Iranian crude shipments would fall as a result of US sanctions, and because of steadily declining supplies from Venezuela. Strong refining margins in the run-up to early October public holidays in China added impetus. China's search for alternative shipments ahead of the reimposition of US sanctions on Iran is likely to have driven imports from Russia to a new high of 1.7mn b/d in October.

China's demand for ESPO Blend has now been rising for a few years, especially after more Chinese independent refiners received crude import quotas and rights to import crude in 2016. China's imports of ESPO Blend from Kozmino are on course to hit a record high of 497,000 b/d in 2018, up from 474,000 b/d in 2017 and 472,000 b/d in 2016. China took only 306,000 b/d of ESPO Blend from Kozmino in 2015.

Pipeline supplies to rise

The Kozmino exports make up only part of China's ESPO Blend demand. It also imports ESPO Blend directly through a pipeline spur from the ESPO system as part of long-term contract between Chinese state-owned CNPC and Russian producer Rosneft. CNPC is taking 580,000 b/d in 2018 through the pipeline spur, which runs from Skovorodino to Mohe, plus 35,000 b/d on tankers that loaded at Kozmino as part of the contract. CNPC may be able to take all of the 615,000 b/d it is contracted to receive from Rosneft through the pipeline spur by 2019. This would cut Rosneft's Kozmino loadings for CNPC and potentially free up capacity at Kozmino for the Russian firm.

Rosneft has signed a new term contract to supply Chinese state-controlled firm ChemChina with up to 48,000 b/d of ESPO Blend from Kozmino in 2019. Rosneft may have signed the deal in anticipation of the extra supplies it will have available for export from Kozmino. ChemChina will likely take the crude for its own refineries in China.

Rosneft is also maintaining a long-term supply deal with Chinese private-sector investment firm CEFC. The deal began in early 2018 and volumes will rise, with CEFC expected to receive 800,000-900,000 t/month (about 210,000 b/d) of Rosneft crude through Kozmino in 2019. This implies total deliveries of 9.6mn-10.8mn t, compared with the 7.1mn t CEFC will receive in total in 2018. CEFC resells the Rosneft cargoes, usually to Chinese refiners or to trading firms that eventually move the volumes to Chinese independent refiners, which are big buyers of the grade. Chinese independent refiners bought 200,000 b/d of ESPO Blend on a delivered ex-ship Shandong basis in November for January delivery, Argus surveys indicate.

Japan, Korea cut back

Demand for ESPO Blend from the rest of Asia-Pacific has eased this year and is unlikely to recover significantly. South Korean refiners processed little ESPO Blend in 2018 as they purchased similar quality North Sea Forties crude and boosted their imports of US crude, mainly light sweet WTI. South Korea was the second largest buyer of US crude in October.

Around 26,000 b/d of ESPO Blend from Kozmino went to South Korea in 2018, but those shipments headed mainly to Yosu or Keoje, where firms including China's state-controilled Unipec have storage.

Japanese refiners, mainly JXTG and Taiyo, took about 55,000 b/d of ESPO Blend in 2018, down from 75,000 b/d in 2017 and 65,000 b/d in 2016. Japan imported 154,000 b/d of the Russian crude in 2015, before Chinese independent refiners emerged as big buyers of the grade.

The strong demand from China also curbed ESPO Blend purchases by other buyers in Asia-Pacific. Refiners in the Philippines, Thailand, Singapore and New Zealand took about 34,000 b/d this year, compared with 45,000 b/d in 2017 and 53,000 b/d in 2016. Around 103,000 b/d of ESPO Blend went to refiners outside of China, Japan and South Korea in 2015.

Most Asia-Pacific buyers have been reluctant to compete with their Chinese rivals for ESPO Blend this year, especially when prices of the crude start to surge. Chinese demand lifted Kozmino spot premiums for ESPO Blend to benchmark Dubai to four-year highs of about $6.60/bl in October.

Increased availabilities of light arbitrage crude in Asia-Pacific — from Nigeria, Libya, the Caspian and the US — have also made these grades more attractive for refiners outside of China.

Seaborne ESPO Blend exports through Kozmino could rise to more than 640,000 b/d in 2019 based on capacity requests submitted by oil producers. This compares with expected shipments of around 625,000 b/d from the terminal in 2018. Russian pipeline operator Transneft plans to complete expansion work on the ESPO system next year to increase overall capacity to 735,000 b/d from 2020, in line with loading capacity at Kozmino. But it is highly likely that most of the increased ESPO Blend export volumes will end up in China.

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21/03/25

Opec+ overproducers outline new compensation plans

London, 21 March (Argus) — Seven Opec+ members have submitted plans to the Opec secretariat detailing how they intend to compensate for producing above their crude production targets since January 2024. The plans show that Iraq, Kazakhstan, Russia, the UAE, Kuwait, Oman and Saudi Arabia will reduce their combined output by an average of 263,000 b/d over the 15 months to June next year (see table) . This is to compensate for exceeding their production targets by a cumulative 4.203mn b/d between January 2024 and February 2025. This figure does not represent a monthly average, but rather the sum of the monthly volumes by which the group's overproducers have surpassed their respective output ceilings. It works out to an average monthly overproduction of 300,000 b/d in the same period. If implemented fully, these compensation related cuts would partly offset a plan by these seven members plus Algeria to return 2.2mn b/d of voluntary production cuts starting in April over 18 months. In fact, the scheduled output increases for April and May would be entirely wiped out. But there is no guarantee the compensation related cuts will be delivered. Some members, Iraq and Kazakhstan in particular, have largely failed to deliver on past commitments to reduce output to below their production targets. By Aydin Calik Opec+ overproduction compensation plan* Iraq Kuwait Saudi Arabia UAE Kazakhstan Oman Russia Total Mar-25 116 15 38 5 25 199 Apr-25 116 8 9 5 53 7 51 249 May-25 135 15 6 10 57 10 76 309 Jun-25 130 23 10 72 12 102 349 Jul-25 120 30 10 66 14 127 367 Aug-25 115 38 10 81 18 152 414 Sep-25 120 27 10 85 20 173 435 Oct-25 120 10 90 13 233 Nov-25 120 20 84 224 Dec-25 120 20 49 189 Jan-26 123 33 39 195 Feb-26 123 33 38 194 Mar-26 123 33 40 196 Apr-26 123 50 38 211 May-26 125 55 42 222 Jun-26 125 56 36 217 Average reduction 262.7 *the amount by which members pledge to produce below their existing targets each month Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Canada needs more oil pipelines: PM Carney

20/03/25

Canada needs more oil pipelines: PM Carney

Calgary, 20 March (Argus) — Canada needs to build more oil pipelines to reduce its dependence on foreign supplies while opening up new trade corridors for exports, prime minister Mark Carney said today, amid an escalating trade war with the US. "It's about getting things done. It's about getting, yes, getting pipelines built, across this country, so we that can displace imports of foreign oil," Carney said while in Edmonton, Alberta. A US-triggered trade war has sparked an urgent need across Canada to diversify its trading partners and limit the country's reliance on the US. This has lifted public support for getting pipelines and other infrastructure energy projects built. The prime minister envisions the federal government "using all of its power" and new legislation to expedite such projects, adding "additional levers" will be discussed when he meets with provincial premiers on 21 March. "We need to do things that had not been imagined or had not been thought possible, at a speed we haven't seen before," said Carney. "That's the nature of the time." TC Energy's current chief executive along with 13 other executives from the country's largest oil and gas companies urged the federal government this week to declare a "Canadian energy crisis" to expedite infrastructure projects. General election soon Carney is expected to call a general election soon with his Liberal party riding high in the polls. Despite the Liberals' recent track record on energy infrastructure, Carney is looking to appeal to Alberta voters eager for pipelines who typically vote for the rival, pro-oil patch Conservatives. A combined C$280bn ($194bn) of Canadian oil and natural gas projects have been cancelled over the past decade, according to the Canadian Association of Petroleum Producers. Of this, C$164bn in the form of LNG projects, C$63bn in pipeline projects, C$30bn in oil sands projects and C$22bn in refinery projects. TC Energy's 1.1mn b/d Energy East pipeline is commonly referenced by industry as a nation-building project that, proposed in 2013, would have supplied Albertan oil to eastern Canada but was abandoned because of changing regulations. There was still no clear indication of when a decision by the federal government could be obtained when TC Energy cancelled it in 2017. Energy East would have piped oil as far east as Irving Oil's 320,000 b/d refinery in Saint John, New Brunswick, which relies on foreign imports, while also giving shippers an outlet to export to Europe and beyond. Canada imported 490,000 b/d of crude in 2023, according to the Canada Energy Regulator (CER). Of this, 355,000 b/d came from the US, 63,000 b/d from Nigeria and 53,000 b/d from Saudi Arabia. Canada meanwhile produces about 5mn b/d, sending about 80pc of that to the US. Carney's infrastructure push includes the proposed Pathways Alliance project in Alberta, which entails a C$16.5bn carbon capture and storage hub that could remove up to 22mn t/yr of CO2 by 2030. Generally, Carney wants to pursue energy and trade corridors and trade including potentially from Alberta to either the Canada's Arctic coast in Nunavut or to Hudson Bay via Churchill, Manitoba. Or both. The subject of trade and pipelines was front and center during a meeting with Alberta premier Danielle Smith earlier in the day, who has criticized the federal Liberals for years. "Albertans will no longer tolerate the way we've been treated by the federal Liberals over the past 10 years," said Smith in a statement, adding a specific list of demands, including "unfettered oil and gas corridors to the north, east and west". The Nunavut project, called the Grays Bay Road and Port Project, is a proposed deepwater port that would cater to critical mineral exports. The proponent, West Kitikmeot Resources, told Argus earlier this month that it had not yet had discussions with Alberta about developing crude capabilities. By Brett Holmes Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Upper Mississippi River reopens for transit

20/03/25

Upper Mississippi River reopens for transit

Houston, 20 March (Argus) — The first towboat arrived at St Paul, Minnesota, today, marking the start of the 2025 navigation season on the upper Mississippi River, according to the US Army Corps of Engineers (Corps). The Neil N. Diehl passed through Lock 2 at Hastings, Minnesota, with nine barges, crossing into St Paul on 19 March. Tows reaching St Paul signify the unofficial start of the navigation season, as St Paul is the last port to open on the Mississippi River after winter ice thaws each year. This is considered an average start time for the navigation season, which typically opens the third week of March. The first tow to reach St Paul in 2024 arrived on 17 March. The Corps released the final Lake Pepin ice measurements of 17in on 12 March and was unable to take new measurements this week since the ice had melted significantly. Lake Pepin measurements help determine when the ice will be thin enough for barges to transit up river. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Nigeria's Trans-Niger oil pipeline restarts after fire

20/03/25

Nigeria's Trans-Niger oil pipeline restarts after fire

Lagos, 20 March (Argus) — Nigeria has restarted pumping crude through the 180,000 b/d Trans-Niger Pipeline (TNP) to the Bonny export terminal after an apparent attack led to a fire earlier this week, halting flows and prompting President Bola Tinubu to declare a state of emergency in Rivers State . The Renaissance Africa consortium — which only last week took over operatorship of the TNP and the Bonny terminal from Shell — said pipeline flows were restored on 19 March "following integrity inspection, testing and activation of a second pipeline within the network". The last 20km stretch of the 60km TNP, between the Cawthorne Channel and the Bonny terminal, has separate 30-inch and 24-inch lines. Renaissance Africa did not say which of the two is currently active. The fire on the pipeline caused a brief halt to operations at the Bonny terminal but loadings have now resumed. A source at state-owned oil firm NNPC told Argus that the Bryanston tanker started loading at the terminal at 23:54 local time on 19 March. Market participants said loading operations at the export terminal were behind schedule by up to two weeks anyway. Before the pipeline fire, the next scheduled operation at the terminal had been to pump 475,000 bl of Bonny Light crude to NNPC's 210,000 b/d Port Harcourt refinery. NNPC said it had to contain a flare incident at the refinery on 19 March. The company described it as "a minor incident" and said the refinery remains operational and "continues to produce on-spec refined petroleum products". The TNP has been the target of repeated oil theft, vandalism and sabotage in the past. As part of the state of emergency in Rivers State, President Tinubu appointed a former chief of the navy as the state's sole administrator for the next six months, but this is subject to the approval of the national legislature, which is expected later today. A Renaissance Africa source said its drilling operations in Rivers State have continued uninterrupted, while an energy lawyer based in the state's capital Port Harcourt told Argus that government and private business in the city have continued as normal. It is too early to say if and to what extent the pipeline incident has impacted Nigeria's crude output. Production of the Bonny Light crude grade fell by 14pc on the month to 210,000 b/d in February, according to upstream regulator NUPRC. Renaissance Africa said a TNP joint investigation visit, led by NUPRC, is scheduled for today. By Adebiyi Olusolape Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

US imports of Canadian crude at 2-year low: Update

19/03/25

US imports of Canadian crude at 2-year low: Update

Adds preliminary import data for Canada, Mexico. Calgary, 19 March (Argus) — Imports of Canadian crude into the US fell to a two-year low last week with tariffs giving shippers pause, according to Energy Information Administration (EIA) data reported today. Canada is by far the largest source of foreign crude for the US but flows fell to 3.1mn b/d in the week ended 14 March, according to preliminary estimates. This is down by 541,000 b/d from the week before and the lowest since the week ended 24 March 2023, when 3mn b/d was imported. While weekly data can be volatile, the volume of crude from Canada has trended lower in February and the first half of March with shippers likely sensitive to the ever-changing US policy on imports. A 25pc tariff, later reduced to 10pc, on Canadian energy was threatened to start in early February before being delayed by 30 days. It then went into effect from 4-7 March before being lifted again for goods covered under the US-Mexico-Canada (USMCA) free trade agreement. US president Donald Trump is threatening more tariffs will be imposed on 2 April. South Bow, the owner of the 622,000 b/d Keystone pipeline connecting Alberta to the US midcontinent and beyond said just the threat of tariffs prompted uncommitted shippers to dial back exports to the US. Crude imports from Mexico, who have also been targeted by Trump tariffs, were also down on the week at 195,000 b/d. This is lower by 118,000 b/d and is the fifth-lowest on record, according to EIA data going back to 2010. Overall crude imports to the US were only down by 85,000 b/d to 5.4mn b/d on higher deliveries from Colombia, Nigeria and Venezuela, while crude exports rose last week by 1.4mn b/d to 4.6mn b/d. As a result, net imports fell by 1.4mn b/d to 741,000 b/d, the third-lowest level on record in data going back to 2001. Crude stocks rise by 1.7mn bl US crude inventories rose last week as a gain in the Gulf coast region outweighed draws elsewhere. US crude inventories rose to 437mn bl in the week ended 14 March, up from 435.2mn bl a week earlier. This is the highest level since 436.5mn bl in the week ended 12 July 2024. Compared with a year earlier, inventories last week are still down by 8.1mn bl. Stockpiles in the US Gulf coast region rose to 252.3mn bl from 248.8mn bl a week earlier and the highest since June 2024. Inventories at the Cushing storage hub in Oklahoma fell by 1mn bl to 23.5mn bl and are down by 8mn bl from a year earlier. Inventories in the greater US midcontinent region, including Cushing, fell on the week by 2.3mn bl to 105.5mn bl. Crude inventories at the US Strategic Petroleum Reserve (SPR) came in at 395.9mn bl for a weekly gain of 275,000 bl. SPR stocks are not included in the overall EIA commercial crude inventory figures. US crude production fell by 2,000 b/d on the week to 13.57mn b/d. By Brett Holmes US weekly crude stocks/movements Stocks mn bl 14-Mar 7-Mar ±% Year ago ±% Crude oil (excluding SPR) 437.0 435.2 0.4% 445.0 -1.8% - Cushing crude 23.5 24.5 -4.1% 31.4 -25.4% Imports/exports '000 b/d Crude imports 5,385 5,470 -1.6% 6,278 -14.2% Crude exports 4,644 3,290 41.2% 4,881 -4.9% Refinery usage Refinery inputs '000 b/d 15,949 15,880 0.4% 16,102 -1.0% Refinery utilisation % 86.9 86.5 0.5% 87.8 -1.0% Production mn b/d 13.6 13.6 0.0% 13.1 3.8% — US Energy Information Administration Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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