Russia eyes higher Urals oil exports to China amid Indian cutbacks, traders say
MOSCOW, Feb 26 (Reuters) – Russia will aim to keep Urals crude oil exports steady in March by increasing shipments to China as India, a key buyer, cuts purchases following a trade deal with the United States
Export options for seaborne Ural cargoes will narrow next month and India is expected to sharply reduce purchases. Because Türkiye, the third-largest Ural buyer, does not have the capacity to process more Russian barrels, suppliers are turning to China, the world’s largest crude oil importer.
In the current market, Russia has two main options: increase discounts or restrict production. Both would put pressure on Kremlin budget revenues, a trader said.
Market participants predict that discounts to Urals in China could widen to $2-5 per barrel from the current level of $10-12 on a delivered-to-port basis, with some expecting deeper discounts in the coming months.
“There is no new Ural deal in China yet, but traders are preparing for talks to start around minus $15 per barrel on a DES (ex ship) basis,” a trade source told Reuters.
Russia’s oil imports to China may rise for a third consecutive month in February, reaching a record 2.1 million barrels per day, as independent refiners take advantage of discounted cargo after India reduces its purchases.
Still, some market participants warn that Chinese demand for Russian oil may be nearing its peak.
“April could be a critical month for shipments. China’s ‘teapots’ (small refineries) will have purchased supplies, demand may fall and Russia may have to cut production. But the situation is still fluid,” said a source at a major Western oil company.
Further reductions could help maintain high import volumes in China in the coming months, the sources added.
India is expected to sharply reduce Ural imports from March, while volumes in April are expected to fall to around 400,000 barrels per day. Market sources said Nayara refinery is likely to be the only remaining importer.
India’s Russian oil imports fell 12% in January compared to December, and the downward trend is expected to continue this month as well.
(Reuters reporting. Edited by Mark Potter)
