Discounts on Russian crude oil are shrinking as Moscow regains pricing leverage in a tight energy market

• Russia is gaining pricing power for its crude after months of selling barrels at a steep discount.
• ESPO crude is now changing hands at parity with Dubai crude after previously trading at a $20 discount.

Russia is regaining pricing power for its crude oil after selling barrels at steep discounts in the immediate aftermath of its invasion of Ukraine.

ESPO crude, Russian oil from the Far East end of the country, is now changing hands at parity with Dubai crude after previously trading at a $20 discount to Asia's benchmark price, according to Bloomberg.

Urals crude, Russia's key export to Europe, is selling at roughly $20 to $25 below Brent crude versus a prior a discount of $35 in April. Urals crude hasn't rebounded as strongly because most of its buyers were in Germany before Vladimir Putin launched his war on Ukraine.

After the West's shunning of Russian oil, Moscow found other customers for its crude. The majority of the 1 million barrels per day that European refineries stopped buying is landing in Asia and the Middle East, with some of the biggest buyers being in India and Turkey.

Russian crude has even seen an uptick to southern Europe and the Mediterranean region over recent weeks as buyers snap up barrels ahead of the EU's partial embargo.

Meanwhile, the global oil market remains tight. Despite a steep drop in global crude prices due to fears of a recession, supply growth has been muted.

US shale companies have refrained from big increases in production, and OPEC+ has agreed to only minuscule growth in output.