China quietly taking cheap Russian crude while India buys more

BEIJING • China's oil refiners are discreetly purchasing cheap Russian crude as the supply continues to seep into the market.

Unlike India's state-run oil refiners, which have issued a number of tenders seeking to buy Russia's flagship Urals crude among other grades, China's state processors are negotiating privately under the radar with sellers, traders said.

Most buyers are shunning Russian crude after the country's invasion of Ukraine, fearing damage to their reputation or that they would fall foul of sanctions.

China's independent refiners, which account for a quarter of the nation's processing capacity and are mainly based in Shandong province, bought some ESPO oil that is loaded at Russia's eastern port of Kozmino, according to traders.

The recent ESPO purchases by independent refiners, known as teapots, are for May-loading cargoes, and the Chinese processors are continually making inquiries about Russian oil, traders said.

ESPO is a favoured grade because it can be shipped to smaller ports - which are unable to unload larger vessels - from a shorter distance, cutting down costs.

Some teapots are working with traders on financing options and checking on the availability of vessels to ship the crude at a reasonable price, and are also considering buying Urals, said traders.

The cargoes of Urals purchased by state-run processors are for June delivery, they added.

Trading of Russian oil has mostly shifted away from the public eye after the invasion of Ukraine. Willing buyers and sellers are being forced to engage in private negotiations after some tenders attracted zero bids. Shell got heavy criticism after its purchase of Urals not long after the war started.

Another of Russia's Far East crude grades - Sokol - is also flowing to India. State-run Indian Oil Corp and Hindustan Petroleum Corp have bought some Sokol loading in May from ONGC Vides, an equity partner in the Sakhalin-1 project, according to traders. Cargoes are loaded from the De-Kastri terminal.

Japan's Sakhalin Oil and Gas Development Co, known as SOdeco, which has an equity interest in Sakhalin-1, declined to comment on its future exports of Sokol crude.

Traders said some buyers in North Asia are likely to take their already-committed cargoes of the grade in May.

India has so far bought at least 13 million barrels of Urals since late last month, according to data compiled by Bloomberg, with Indian Oil purchasing a further three million barrels in its latest tender.

Volumes to the nation averaged about 128,000 tonnes a month last year, Bloomberg calculations based on ship-tracking data show.

Urals crude is shipped from ports in the Baltic and Black seas.

BLOOMBERG