ESPO crude trading way above the $60 price cap imposed by western governments despite sanctions will help lift Moscow's state revenue.

Around a dozen cargoes of the light sweet ESPO were traded over the past week or so, at discounts of $2 to $2.50 per barrel to November ICE Brent on delivered-ex-ship (DES) basis to China for September, according to multiple trading sources, versus discounts of about $4 in the previous month.

Offers have risen to discounts of about $1.80 a barrel, but no deal has been done at that level, they said.

The September prices are the strongest since the European Union's embargo on Russian oil and the Group of Seven nations' (G7) price cap were imposed in December.

"August prices were already very expensive, but we were shocked to see that offers for September cargoes started at $2 discount," said one trader.

However, higher prices aren't deterring buyers as independent refineries, also known as teapots, are able to absorb the crude's costs at current refining margins while ESPO crude remains cheaper than non-sanctioned oil from West Africa and Brazil, he added.

A Shandong-based trading manager said ESPO blend remained as the baseload of low-sulphur crudes for smaller independent refiners, which are enjoying healthy refining margins thanks to large intakes of cheaper supplies from Iran and Venezuela.

In comparison, Congolese Djeno crude is priced at a premium of about $4 a barrel over November ICE Brent on DES basis for delivery to China in September, traders said. Djeno has a similar sulphur content, but is heavier in quality compared with ESPO.

Brazil's medium sweet Tupi crude, once favoured by Chinese teapots before the Ukraine crisis, is priced at around $4.50 a barrel over ICE Brent for October arrivals, traders said.

China's crude processing rates are also expected to stay elevated to meet transportation fuel demand in the upcoming national holidays in September and October, they said.

Competition from Indian refiners for ESPO is also driving up prices. Indian refiners are estimated to have bought up to seven of August-loading ESPO cargoes, about a fifth of the month's supplies, traders said.

"We may see ESPO prices rise further, to around $1 discount soon, if the OPEC further cut supply to defend oil prices," said another oil trader.

Russia had pledged to cut August exports by 500,000 barrels per day as part of OPEC+ plans to support prices. The Organization of the Petroleum Exporting Countries (OPEC) and its allies will have its monthly Joint Ministerial Monitoring Committee meeting on Aug. 4 to discuss production cuts.