China buys Russian oil at multi-month low discounts, brushes off price cap


SINGAPORE, Dec. 8 (Reuters) – China is paying the biggest rebates in months for Russian ESPO crude amid sluggish demand and poor refining margins, though the effective prices refiners are paying could exceed a price cap set by Western countries this week imposed.

The $60 per barrel limit set by the Group of Seven (G7) countries, the European Union and Australia came into effect Monday to limit Moscow’s power to fund its war in Ukraine, even though Russia has vowed to stop it. defy.

China, Russia’s main oil buyer, has not agreed to the price cap. Traders said they were doing business as usual.

China’s independent refiners, dominant customers of ESPO, a quality exported from the Russian port of Kozmino in the Far East, almost all secure shipments on a delivery basis from merchants who arrange shipping and insurance, protecting the refiners from potential secondary penalties that may result from the price cap.

The slightly sweet crude oil is favored by Chinese refineries due to its proximity and high yield of middle distillates.

But the Chinese government’s zero-COVID policy has weakened the country’s economy and crude oil demand.

At least one ESPO cargo that arrived in December was sold to an independent refiner last week at a discount of $6 a barrel from February’s ICE Brent price on a delivery ex ship (DES) basis, according to four traders with knowledge of the deal.

That compares to a premium of about $1.80 a barrel three weeks ago. At current Brent levels, the $6 discount implies a price of $68 per barrel including freight and insurance costs.

“They (independent mills) don’t really care about the price limit. All they do is calculate the numbers to see if the prices provided are a good profit or not,” said a trade manager at an independent refinery.

“Domestic refining margins are still struggling,” the director added.

As of Thursday, two shipments loaded in December were still unsold, and offers had fallen to discounts of about $7 to $8 a barrel, two trade sources said.

Some early trades of cargoes loaded in January were made at $4 a barrel below March’s ICE Brent, the lowest level for the first month of ESPO since July.

Benchmark Brent fell to its lowest point since January, below $80, on Tuesday.

Traders said ESPO’s low price could soon attract new buying from Chinese buyers, hoping Beijing’s easing of pandemic controls over the past week could fuel demand.

“It is expected that some buyers of Russian crude oil will take a cautious approach in the first few weeks and reduce imports until the legal implications of such trading are clearer,” Rystad Energy analysts Viktor Kurilov and Jorge Leon said in Tuesday. a note.

With the price cap, China, India and Turkey could have more bargaining power, the analysts added.

In Shandong, a province with many independent refineries known as teapots, ESPO is also facing increasing competition, particularly from Iranian oil, which traded at a discount of nearly $10 to ICE Brent last week.

Tanker tracking specialist Vortexa Analytics estimated that Chinese imports of Iranian oil, which pass as deliveries from exporters such as Malaysia and Oman, may have reached a monthly record of nearly 4.7 million tons in November.

Reporting by Muyu Xu and Chen Aizhu; Edited by Bradley Perrett

Our Standards: The Thomson Reuters Principles of Trust.

The Valley Voice
The Valley Voice
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.


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