Russian Urals Crude Offered to China at a Discount

Russia’s Urals crude grade, which usually goes from the western Russian ports to India, is now being offered at discounts in China amid uncertainties over Indian purchases of Moscow’s oil following the additional tariffs. Spot Urals shipments going to China would be a significant re-routing of the Russian oil export flows. Prompt Urals cargoes are now being pitched to Chinese buyers, who typically import the Far Eastern Russian grade ESPO. Urals is being offered at a premium of $1.50 over London Brent, down from a $2.50 a barrel premium last week, traders familiar with the trade offers told Bloomberg. China is the top buyer of Russian crude, but most of its imports consist of the ESPO grade shipped from Russia’s port of Kozmino in the Far East. Urals, on the other hand, is being shipped from the ports in western Russia to India and China hasn’t imported much of the grade due to higher shipping costs and longer voyages. However, with the hiked U.S. tariffs on India over its imports of Russian crude, trade flows have started to shift. The biggest Indian state-owned refiners are pulling out of spot purchases of Russian crude for cargoes loading in October, sources familiar with the procurement plans told Bloomberg on Thursday, a day after the U.S. announced an additional 25% tariff on India over its imports of crude from Russia. Indian state-owned refiners have secured on the spot market at least 22 million barrels in non-Russian crude for delivery in September and October, due to the tariff threat. U.S. President Donald Trump signed on Wednesday an executive order enacting an additional 25% tariff on Indian goods, explicitly targeting India’s ongoing imports of Russian crude oil. The overall 50% tariff on Indian goods will take effect 21 days after August 6. Even if China stepped up Urals spot purchases, it is unlikely to that it could absorb all the crude Indian refiners have been importing, analysts told Bloomberg. By Tsvetana Paraskova for Oilprice.com