Moscow — Russia will aim to keep its Urals crude oil exports steady in March by boosting shipments to China as India, a key buyer, cuts purchases following a trade deal with the U.S.
Export options for seaborne Urals cargoes are set to narrow next month, with India expected to sharply reduce intake. Suppliers are turning to China, the world’s top crude importer, as Turkey – the third-largest Urals buyer – lacks the capacity to process more Russian barrels.
In the current market, Russia has two main choices: increase discounts or curb production. Both would add pressure to Kremlin budget revenues, one trader said.
Market participants anticipate discounts for Urals in China could widen by $2–$5 per barrel from the current $10-$12 on a delivered-to-port basis, with some expecting deeper cuts in the months ahead.
“There haven’t been any fresh Urals deals in China yet, but traders are preparing for negotiations to start at around minus $15 per barrel on a DES (delivered ex ship) basis,” a trading source told Reuters.
Russian oil imports to China could rise for a third consecutive month in February, potentially reaching a record 2.1 million barrels per day as independent refiners take advantage of discounted cargoes following India’s reduced buying.
Even so, some market participants warn that Chinese demand for Russian oil may be nearing its peak.
“April could be a critical month for shipments. The Chinese ‘teapots’ (small refiners) will have bought up supplies, demand may drop, and Russia could be forced to cut production. But the situation remains fluid,” said a source at a major Western oil company.
Further discounting may help sustain high import volumes in China over the coming months, sources added.
India is expected to sharply reduce Urals imports from March, with volumes in April projected to fall to about 400,000 bpd. Nayara refinery will likely be the only remaining importer, market sources said.
India’s imports of Russian oil fell 12% in January from December, and the downward trend is expected to continue this month.
Reporting by Reuters. Editing by Mark Potter – Reuters
