By Shahzaib Saqib — SCN News
MOSCOW/SINGAPORE, Sept. 18 — Russia’s flagship ESPO Blend crude has surged above $120 a barrel for the first time since April, as Chinese refiners compete for increasingly scarce Russian supplies after the U.S.-Israeli war on Iran disrupted Middle Eastern oil flows, traders said and market data showed on Friday. The sharp increase is giving Moscow significantly higher prices for some of its most sought-after barrels even as Washington and its allies pursue measures intended to restrict Russia’s oil revenues.
Three traders told Reuters that ESPO had crossed the $120 threshold, while Reuters calculations showed premiums for the Russian grade over benchmark ICE Brent reaching record levels of roughly $20 to $30 a barrel depending on the cargo and delivery period. Urals, Russia’s other major export grade, has also risen sharply, reaching around $110 a barrel this week.
The immediate driver is China. Chinese refiners have increased purchases of Russian crude as disruptions to Middle Eastern supplies — particularly Saudi Arabian barrels — threaten refinery feedstock availability ahead of the Northern Hemisphere winter, when heating-fuel demand typically rises. Major Chinese state-owned energy companies have secured much of the available ESPO supply for November and December, according to traders cited by Reuters.
ESPO, short for Eastern Siberia-Pacific Ocean, is particularly attractive to Chinese buyers because it is exported from Russia’s Pacific coast and can reach northern Asian refineries relatively quickly. Chinese refiners normally purchase the grade one or two months ahead, but concerns about supply have prompted some buyers to secure December-loading cargoes earlier than usual. Smaller independent Chinese refiners — traditionally important ESPO customers — are consequently facing reduced availability and are being forced to compete for alternative crude on the global spot market.
The shift has been building for months. Reuters reported in August that Sinopec, the world’s largest refiner by capacity, had sharply increased purchases of Russian Far East crude after Middle Eastern supply losses. Sinopec bought an estimated 30 to 40 ESPO cargoes for July-to-September delivery, equivalent to roughly 241,000 to 320,000 barrels per day, according to traders and shipping data cited by Reuters.
The transformation in pricing has been particularly striking. Before the Iran war, ESPO could trade at a discount of around $10 a barrel, according to Reuters. By Sept. 10, Platts assessed ESPO delivered into North Asia at $105.01 a barrel as premiums moved above $20, with market participants already describing supply as exceptionally tight. Friday’s move beyond $120 shows how quickly the physical crude market has tightened as Asian refiners compete for barrels outside the disrupted Middle Eastern supply chain.
Saudi supply problems have added to that pressure. Earlier this week, Saudi Arabia suspended some shipments to Europe after drone attacks damaged its East-West pipeline and disrupted operations at Yanbu, forcing buyers to seek replacement crude from the North Sea, the United States, Kazakhstan, Algeria and Guyana. Brent futures approached $108 a barrel during that disruption, while some physical crude grades in Europe reached around $122.
Russia is consequently benefiting from a global supply shock at a politically sensitive moment. Western governments designed their price-cap regime to reduce Moscow’s oil income while keeping Russian barrels on the international market, thereby avoiding a supply shortage that could drive global prices sharply higher. But ESPO’s current market value is far above the caps applied by Western jurisdictions to Russian crude transported using covered Western maritime services.
The European Union, Britain and Canada currently apply a $44.10-per-barrel threshold, Japan uses $47.60 and the United States retains a $60 cap, according to S&P Global and European Commission information. Those restrictions do not mean Russian producers are legally required to sell every barrel below those levels. Instead, they restrict access to covered Western shipping, insurance and related services when Russian crude is sold above the applicable cap, while Russia has increasingly relied on non-Western shipping and insurance arrangements.
The price surge is also colliding with a new U.S. attempt to increase economic pressure on Moscow. U.S. lawmakers on Thursday approved legislation enabling President Donald Trump to impose tariffs targeting purchases of Russian oil as Washington seeks to reduce the energy revenues available to Russia during its war in Ukraine. Traders told Reuters that such measures could constrain Russian flows to major buyers such as China and India, but could also tighten global supply further and push oil prices higher — potentially increasing the value of Russian barrels that continue reaching the market.
That tension is now at the center of the oil market. Russian crude has become more valuable precisely as geopolitical disruptions make alternative supplies harder to secure. Sanctions can raise the cost and complexity of moving Russian oil, but if enough barrels are removed or redirected while global demand remains strong, the resulting supply pressure can also increase prices for crude that continues to trade.
Friday’s ESPO move therefore extends beyond a Russian oil-price milestone. It shows how the Iran war is reshaping global crude flows, drawing China more deeply toward Russian supply and creating a potential conflict between Western efforts to squeeze Moscow’s energy revenues and the need to prevent a broader oil shortage from driving prices still higher.