China Increases Purchases of Discounted Russian Crude Amid India’s Reduced Buying

Even as U.S. President Donald Trump calls for a halt to global purchases of Russian crude oil, China is poised to increase its imports from Russia to record levels. In February, shipments of Russian oil to China are projected to reach approximately 2.07 million barrels per day, marking a significant rise from January’s estimated 1.7 million barrels per day. This surge is largely driven by independent Chinese refiners capitalizing on heavily discounted Russian cargoes, while India’s demand for Russian oil continues to decline.

Record Imports Amidst Global Tensions

China’s appetite for Russian crude is expected to grow for the third consecutive month, with preliminary assessments from Vortexa Analytics indicating a substantial increase in imports. The projected 2.07 million barrels per day for February represents a notable jump from January’s figures. Kpler’s provisional data further supports this trend, estimating February imports at around 2.083 million barrels per day, compared to 1.718 million barrels per day in January. This increase comes at a time when India is reducing its intake of Russian oil, creating a shift in the global oil market dynamics.

India’s Declining Demand

As China ramps up its purchases, India’s imports of Russian crude are forecasted to decline to approximately 1.159 million barrels per day in February. This reduction in demand has led to lower prices for Russian crude, with discounts ranging from $9 to $11 per barrel compared to the benchmark ICE Brent. These discounts are among the deepest seen for the Urals grade, which has traditionally been directed to India due to shorter shipping distances. Since November, China has overtaken India as the largest buyer of Russian seaborne crude, influenced by Western sanctions related to the ongoing conflict in Ukraine and pressure on India to strengthen trade ties with the United States.

Competitive Edge of Russian Crude

The influx of Urals and other Russian crude grades, such as Sokol and Varandey, has intensified competition with supplies from Iran. Concerns about potential U.S. military action against Iran have made Chinese refiners, known as teapots, more cautious about sourcing Iranian oil. A senior trader noted that Russian crude has gained a competitive advantage over Iranian oil due to its processing quality relative to price. Recent trading data indicates that the ESPO blend from Russia was priced at discounts of about $8 to $9 per barrel for March deliveries, while Iranian Light was assessed at $10 to $11 below the same benchmark.

Market Uncertainty and Future Prospects

Market uncertainties surrounding U.S. military actions against Iran have prompted Chinese refiners to view Russian supplies as more reliable. Analysts suggest that the increase in Russian crude purchases may also stem from larger independent refiners outside Shandong, the primary hub for teapot refiners. Vortexa’s estimates indicate that Iranian oil shipments to China, often disguised as Malaysian to evade U.S. sanctions, have decreased to around 1.03 million barrels per day in February, down from approximately 1.25 million barrels per day in January. This shift highlights the evolving landscape of global oil trade, with China solidifying its position as a key player in the market.

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