Bloomberg: China increases Russian oil purchases as India scales back imports

Chinese refiners are significantly increasing purchases of Russian crude oil, offsetting a decline in shipments to India, traditionally Moscow’s largest buyer of seaborne barrels, according to vessel-tracking data compiled by Bloomberg.

Deliveries of Russian crude to Chinese ports averaged 2.09 million barrels per day during the first 18 days of February. That marks a sharp rise from 1.72 million barrels per day in January and 1.39 million barrels per day in December. The surge has more than compensated for reduced buying from India.

India’s imports of Russian oil have hovered at around 1.2 million barrels per day in recent months, down from 1.78 million barrels per day in November and roughly 40% below a peak recorded in June last year.

Russia’s ability to secure buyers for its crude is critical for the Kremlin as the war in Ukraine approaches its fourth year. Millions of barrels have accumulated at sea amid longer shipping routes and delivery delays, while there are indications that Russian production and drilling rates are facing mounting pressure.

At the same time, Indian refiners have faced pressure from the United States to curb crude purchases from Moscow. The extent and duration of any reductions are expected to depend on the progress of ongoing trade discussions between Washington and New Delhi.

The shift in trade flows has led to a buildup of approximately 140 million barrels of Russian oil on the water — including both floating storage and cargoes in transit — representing an increase of more than 60% since the end of August, when India began reducing purchases and China stepped in more aggressively.

When Indian buyers first started turning away from Russia’s flagship Urals crude in August, Chinese refiners — including Shandong Yulong Petrochemical Co. — moved quickly to acquire discounted cargoes, purchasing at least 10 shipments. In the months that followed, the company’s large refining complex became China’s single-largest buyer of Urals after UK and EU sanctions restricted its access to other sour crude grades, prompting a pivot toward Russian supplies. The refiner also imports the ESPO blend shipped from Russia’s Far East.

More recently, additional private Chinese refiners have shown interest in Urals as discounts deepened. According to traders involved in the transactions, prices for Urals delivered to China have fallen to as much as $12 per barrel below ICE Brent in recent weeks, reflecting weaker Indian demand and the growing availability of Russian cargoes.

By Sabina Mammadli