Discounts on Russian oil exports to China widened to new records this week as sellers cut prices to lure demand from the world’s top crude importer and offset the likely loss of India sales, traders said.
A halt by India would make China the only major client for cheap Russian oil. The world’s second-biggest oil exporter is already struggling with falling demand from India due to Western sanctions, with Russian oil in floating storage rising.
JPMorgan analysts led by Natasha Kaneva said their base case is that India will import Russian crude at 800,000 to 1 million barrels per day, or 17-21% of its total crude imports, after the trade deal.
Discounts for ESPO Blend, delivered from the Pacific port of Kozmino to China, widened to nearly $9 a barrel to ICE Brent this week, from $7–$8 in recent months, trade sources said.
Discounts for Russian Urals grade, exported from the Baltics – typically to India – were at about $12 per barrel and could widen further, they added.
See also: China’s CNPC set to restart Dalian refinery to process Russian oil
The unexpected decision will allow CNPC to resume purchases of seaborne Russian oil, which were halted in October, according to several of the 12 sources who spoke to Reuters.
The Dalian refinery, once PetroChina’s largest and most profitable, was one of its largest processors of Russian crude. It handled ESPO Blend crude delivered via the 4,070-kilometre (2,529-mile) East Siberia-Pacific Ocean Pipeline.
It was not immediately clear if the Dalian plant will process Russian oil supplied via pipeline or by sea, the sources said.