China's Refiners Shift to Russian Crude Amid Middle East Supply Disruptions
Chinese refiners are buying more sanctioned Russian crude oil despite discounts narrowing due to robust demand from India, another major buyer. The shift comes as Middle East supply drops following an escalation in the Iran war and threats to block Saudi oil exports.
The recent purchases by two major Chinese refiners of ESPO Blend crude from Russia's Pacific port of Kozmino were sold at a discount of $1 to $3 per barrel compared with ICE Brent, a significant improvement from previous discounts. This is attributed to India's increasing demand for Russian oil and the resulting higher prices.
Meanwhile, independent refiners in eastern China's Shandong refining hub are discussing deals with Iranian oil sellers, although they are not rushing to buy due to worsening refining margins and Brent surging to nearly $100 a barrel. Iranian Pars crude was recently sold at a discount of about $8 a barrel to ICE Brent for delivery to Shandong.
The disruption in Middle East supply is causing Chinese refiners to seek alternative sources, with some reselling previously purchased Middle Eastern crude for profits. The situation highlights the complexities and uncertainties in global oil markets and the strategies employed by major players to navigate them.