China Refiners Grab Russian Oil As Trump Menaces Flows To India

"Generally, Chinese refineries are in a comfortable position to keep taking Russian oil for now, in contrast to Indian refiners,” said Jianan Sun, an analyst at Energy Aspects Ltd. Urals — which ships from Russia’s west — remains competitive against alternative grades from the Middle East, Sun said.

The global oil market is focused on shifts in global flows as US President Donald Trump steps up a diplomatic push to try and broker an end to the war in Ukraine. As part of that drive, Washington has doubled a levy on all Indian imports to punish the nation for taking Russian crude, although it hasn’t yet followed through with a comparable measure against China amid a trade truce with Beijing. The Asian nations are the top buyers of Moscow’s oil.

The differing approaches — which have presented Chinese refiners with a buying opportunity — have been on display in recent days. Last Friday, Trump said he would hold off on raising tariffs on Chinese goods over the country’s purchases of Russian oil, citing progress with Russian President Vladimir Putin toward ending the war. Meanwhile, White House trade adviser Peter Navarro has described India’s buying as “opportunistic and deeply corrosive,” while also acknowledging that the US can’t go further on China without hurting itself.

“One thing is certain: Trump will not do things which he knows he cannot achieve,” said Mukesh Sahdev, head of commodity markets at Rystad Energy A/S. “Putting pressure on India, he has certainly achieved and he can make an impact, but putting pressure on China? Probably not.”

Refiners in China, Asia’s largest economy, have likely purchased 10 to 15 cargoes of Urals for October and November delivery so far, more than their usual intake, according to Kpler and Energy Aspects.

“I won’t be surprised to see more November-delivered cargoes to be bought by the Chinese in the coming days” if Urals prices remained attractive, said Muyu Xu, senior crude analyst at Kpler.

The grade was most recently offered at $1 a barrel premium over Dated Brent, with no further discounts seen, following elevated interest from Chinese refiners, according to traders in the market who asked not to be identified.

At present, at least two tankers carrying Urals — each with capacity of 1 million barrels — are waiting off China’s coast, with more expected in coming weeks, according to tracking data compiled by Bloomberg. The vessels — Georgy Maslov and Zenith — are idling near Zhoushan. That’s the base for Zhejiang Petroleum & Chemical Co., and also close to strategic storage tanks.

Indian processors remain on the sidelines, although they have been receiving and considering offers for Urals, the traders said.

Excess Russian barrels “have to be removed, and those barrels can only be removed by China into storage,” said Sahdev. “Without China buying, the Russian crude may start discounting more to get new buyers.”