01 Feb 2010;economictimes.indiatimes.com:SINGAPORE/NEW DELHI: South Korea's GS Caltex has emerged as the first refiner to buy new Russian ESPO (Eastern Siberia Pacific Ocean) Blend crude, as others from Japan to India hesitate to buy the grade before its quality stabilises and until prices fall. ESPO prices have oscillated, making it difficult to see a trend for the medium-sweet crude, which refiners are still waiting to test in a big way in refining system for its product yields. Most other untested crude have traded at discounts. Yet, a December-loading cargo traded at a premium of 50 cents to the Dubai benchmark, while those for early-February loading moved at discounts as deep as $1.30 a barrel. For late February, shipments fetched premiums up to 30 cents. Are more refiners ready to buy and process the middle distillate-rich ESPO Blend, while reduce purchases of rival Middle Eastern grades? Price the issue for untested crude Bears said that prices of the untested ESPO crude remained high, leaving most of the cargoes that have been loaded from Kozmino terminal since December in floating storages off South Korea. "We keep a close eye on it and have interest in it, but we are not active at the current price level," said a trader with a Northeast Asian refiner. "Probably smaller refiners are more eager to buy, but big refiners and majors tend to wait," he said, adding that an ideal price would be a discount that is deeper than $2.00 a barrel to Dubai. Russia has yet to provide refiners with an assay, or detailed quality characteristics for ESPO, and the quality is still evolving and could settle at a lower grade, traders said. "We don't know the properties of this crude as yet," said a trader with an Indian refiner. "We will wait for more information and then, depending on pricing and acceptability to our system, we may look at buying it." Assay release to stir demand Others who are more hopeful argued that Russia will release an assay on ESPO soon. One small Japanese refiner has gotten sample and is testing the crude. "I think refiners will get the assay or sample (of ESPO) soon and once it is found that its quality doesn't have a serious problem, refiners will start to buy," another trader with a Northeast Asian refiner said. The source with the Japanese refiner said that because the sulphur content is relatively high, it would likely take longer to enter the market and only limited volumes can be processed. "As it is, acceptability of Russian crude in Indian systems is very low because of pricing issues, particularly freight. And this will come from east Siberia, so I think this crude will best suit refiners in Korea, Japan and China," another source with an Indian refiner said. "But if we get at a right price then we would like to try it," he said. If more of the grade is taken, traders said it could have a big impact on Oman crude because the first indications are that the two crudes are similar in quality.
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