New record! China laps up discounted Russian crude as India reduces purchases; threat of US strikes on Iran adds to jitters

This is more than January’s estimated 1.7 million barrels per day, based on preliminary assessments by Vortexa Analytics.

Separate provisional figures from Kpler indicate imports of roughly 2.083 million barrels per day in February, compared with 1.718 million barrels per day a month earlier.

This comes amidst India reducing its intake, according to traders and vessel-tracking data quoted by Reuters.

China Buys More Russian Crude As India Steps Back

Data from Kpler shows India’s imports of Russian crude are likely to decline further to around 1.159 million barrels per day in February.

The reduced demand has pushed Russian crude prices lower, with cargoes for January and February delivery to China trading at discounts of $9 to $11 per barrel to benchmark ICE Brent.

These discounts are among the deepest seen in recent years for the Urals grade, which is shipped from European ports and had typically been directed to India because of shorter shipping distances compared with China.Since November, China has overtaken India as Russia’s largest buyer of seaborne crude.

Western sanctions linked to the war in Ukraine, along with pressure on New Delhi to advance a trade agreement with the United States, prompted India to scale back Russian oil buys to a two-year low in December, the Reuters report said.Also Read | Trump removes 25% penal tariff: What happens if India stops buying Russian crude oil?Supplies of Urals, along with other export grades such as Sokol and Varandey, have added to regular shipments of Russia’s flagship ESPO blend exported from the Far East port of Kozmino, which is geographically closer to China.

This has intensified competition with rival crude supplies from Iran.Concerns over potential US military action against Iran have unsettled China’s independent refiners, commonly referred to as teapots, which are among the largest buyers globally of oil subject to US sanctions from Russia, Iran and Venezuela.According to a senior Chinese trader who frequently supplies these refiners, Russian crude has recently gained a competitive edge over Iranian oil in terms of processing quality relative to price.

The trader noted that the ESPO blend was last traded at discounts of about $8 to $9 per barrel to ICE Brent for March deliveries, while Iranian Light — a comparable grade — was assessed at roughly $10 to $11 below the same benchmark.Market uncertainty since January regarding the possibility of US strikes on Iran, in the event that nuclear negotiations fail to meet Washington’s expectations, has made Chinese teapots and traders more cautious about purchasing Iranian cargoes, said Emma Li, China analyst at Vortexa.She explained that concerns over potential disruptions to Iranian oil loadings in the event of military tensions have made Russian supplies appear more dependable to buyers.

Li also indicated that part of the recent increase in Russian crude buys has come from larger independent refiners located outside Shandong, the main hub for teapot refiners.Vortexa estimated that Iranian oil shipments to China, often labelled as Malaysian by traders to bypass US sanctions, declined to around 1.03 million barrels per day this month, compared with about 1.25 million barrels per day in January.