Russia is trying to sell oil to China at a discount
11 February 17:45
Chinese refineries are being offered Russian ESPO crude at lower prices as growing concerns over US sanctions increase logistical and administrative hurdles, which scares off buyers. This was reported by Komersant ukrainskyi with reference to Bloomberg.
According to traders, shipments from the Russian Pacific port of Kozmino, which are carried out on unauthorized tankers, are offered at a premium of $2 to $3 per barrel to the price of Brent crude oil. They note that the shipments are due in March. This compares with a premium of $5 per barrel or more offered last month for deliveries on the same terms.
The limited number of ports and tankers willing to work with Russian traders has increased the cost of shipping ESPO to China and made cargoes too expensive for independent refiners, forcing them to cut back on refining. The drop in demand from key buyers forced sellers to cut prices.
In addition, some Chinese state-owned refineries are staying on the sidelines this month as they weigh the risks and consequences of working with ESPO, traders said.
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The Biden administration early last month imposed sweeping sanctions on the Russian oil industry that affected much of the fleet that served Kozmino. ESPO’s transportation fees to China have risen sharply, and tankers that used to frequent Russia’s western ports have been diverted eastward.
According to Michelle Wiese Bockmann, chief analyst at Lloyd’s List Intelligence, the active shadow fleet carrying Iranian, Russian and Venezuelan oil, numbers about 669 tankers. Of this number, 250-300 tankers were usually engaged in the transportation of Russian oil. The US imposed sanctions on shadow fleet vessels at a time when Russia has reached record exports of petroleum products over the past 5 months.
Even before the latest US sanctions, Chinese ports were cautious about servicing sanctioned tankers. As a result, some vessels carrying ESPO and another Russian crude, Sokol, have been idle off the coast of China.
To trade ESPO, buyers and sellers are considering using lesser-known oil terminals or exploring the possibility of unloading outside Shandong province and then reloading onto another tanker, which would reduce government scrutiny, traders said. However, these measures require additional costs that most refiners cannot afford at the moment.
