Russian Sokol crude trades at post-pandemic high on firm distillate cracks, wide EFS

15 Oct 2021

Quantum Commodity Intelligence - Russian light sweet Sokol crude for December has traded at the highest premiums since last February, as distillate-rich grades in Asia-Pacific were lifted by healthy refining margins and the wide Brent/Dubai EFS spread this month.

Sokol equity-producer ONGC sold two cargoes at Dubai +$5.30/b and +$5.80/b, basis Yesua, the highest premium since February last year when low-sulfur crudes were fetching huge premiums following the implementation of IMO 2020, which mandates 0.5%-sulfur bunker fuel.

In February 2020, just before the Covid-19 pandemic going global, March-loading Sokol crude was trading at premiums of more than $8.00/b to Dubai.

Both gasoil and jet cracks in Asia have surged to post-pandemic highs this week, with benchmark November 10ppm gasoil swaps hitting +$13.44/b vs Brent Friday and November Jet/Kero at +$11.81/b.

Gasoil has strengthened on firm demand for power generation amid record coal and natural gas prices in Asia, while kerosene is used for home winter heating in Northeast Asia.

At 37.7 degrees API gravity and around 0.17% sulfur, the grade competes with similar light sweet crude from the North Sea and West Africa.  

This month, the wide Brent/Dubai spread has made barrels pricing versus Dated Brent more expensive for Asian refiners, so it will be more economical to pay a higher premium for regional cargoes such as Sokol, which loads from the Russian Pacific coast.  

The Brent/Dubai EFS has been above $4.00/b since the last week of September, with the December EFS assessed by Quantum at $4.10/b on Friday.

Russia’s Surgutneftegaz tender for December ESPO crude closed Friday, with bids expected to be close to Dubai +$5.00/b for the similarly gasoil-rich grade.

Asian crude markets also received a boost Friday following a report that China’s independent refiners have been issued fresh import quotas.