Chinese and Indian imports of Russian oil reached a record high last month thanks to Moscow’s discounts, according to preliminary assessments from ship trackers.
The jump in Russian supplies comes ahead of a meeting between the Organization of the Petroleum Exporting Countries and their allies including Russia on June 4.
Producers face some pressure to act to support Brent futures which have fallen 5% this week to about $73 a barrel despite an OPEC+ pledge in April to cut more output from May.
However, they are unlikely to deepen supply cuts at the Sunday meeting despite lower prices, sources from the alliance told Reuters.
The world’s No1 and No3 crude importers and top buyers of Russian oil imported about 110 million barrels in May, data from Vortexa and Kpler showed, up nearly 10% from the prior month despite US warnings against price cap evasion.
Arrivals of Russian shipments in India are said to have reached a record high of 8.6 million tonnes (62.8 million barrels) while China received 6 million tonnes, steady from April, according to Vortexa.
Data from Kpler showed a similar trend, with India’s imports hitting a record of 66.7 million barrels and China’s rising to 49.2 million barrels.
Indian refiners stepped up purchases of medium sour crude Urals and lighter grades such as Sokol and Varandey, in addition to a steady inflow of ESPO crude exported from the Pacific port of Kozmino, the data showed.
In China, refiners are scrambling to cut feedstock costs and improve refining margins amid a slower-than-expected economic recovery. Large private oil refiners started buying Russian oil earlier this year and have increased volumes in recent months.
“We see more new buyers from China these days,” said an official with a Russian oil company.
Middle-East Crude Imports Drop
Private refiner Hengli Petrochemical, which operates a 400,000-barrel-per-day refinery in northeast Dalian, received its first Urals crude cargo of 730,000 barrels in early May and another 2 million barrels arrived on Wednesday night, the shiptracking data showed. Hengli also bought 3.71 million barrels of ESPO that arrived in the same month.
“Chinese buyers’ increased demand for Russian oil loading in April and beyond was supported by higher profitability of supplies amid softer freight and firmer differentials,” said a trader involved in Russian oil marketing.
The lumpsum freight rates for tankers carrying ESPO crude from Kozmino to northern China fell to $2.2 million after hitting an all-time high of $2.4 million in mid-March, Simpson Spence Young data on Refinitiv Eikon showed.
Spot premiums of July-loading Middle Eastern crude benchmarks Oman and Dubai in May versus April fell by 47% and 41%, respectively.
- Reuters with additional editing by Sean O’Meara