Oil market price battle: Russia and Iran offer bigger discounts to China as crude piles up at sea – The Times of India

Russian and Iranian oil producers are reportedly offering bigger discounts to compete for the same limited pool of Chinese buyers after India pulled out of the purchases. Analysts say India’s imports from Russia could fall 40 percent from January levels to around 600,000 barrels per day, according to a scenario by Rystad Energy, as reported by Bloomberg.Much of the crude moved east, leading to a price war with Iranian suppliers, long favored by China’s independent refiners known as Teapots. Russian Urals crude is reportedly selling for around $12 a barrel below ICE Brent, compared to a discount of $10 last month. Iranian light crude is trading as much as $11 below the global benchmark, rising from $8 to $9 in December, according to traders.

“China’s private refineries can’t process much more because their capacity is probably maxed out,” said Jianan Sun, an analyst at Energy Aspects, noting that sanctioned barrels are piling up in both onshore and offshore storage.The Chinese teapots historically act as a pressure valve, absorbing vessels shunned by others, but their capacity is limited; they account for roughly a quarter of the country’s refining capacity and are also subject to government import quotas. Major state refiners, meanwhile, have traditionally avoided Iranian crude and have also largely stayed away from Russian barrels lately.With China unable to fully absorb the displaced supply, unsold oil is piling up in Asian waters, causing problems for Russia and Iran. The Kremlin has already cut production, leaving the country without money for the war in Ukraine, while Iran is trying to ship as much oil as possible for fear of a possible US attack.Data shows that Russian oil deliveries to Chinese ports rose to 2.09 million barrels per day in the first 18 days of February, up roughly 20 percent from January and almost 50 percent more than in December. In contrast, Iranian exports to China fell by about 12 percent from a year earlier, to about 1.2 million barrels per day, according to Kpler. The company estimates there are now nearly 48 million barrels of Iranian crude in the sea, up from about 33 million at the beginning of February. Russia’s cargo in Asian waters totals about 9.5 million barrels.A possible US attack on Iran could disrupt exports if oil facilities are attacked or shipments through the Strait of Hormuz are blocked. Russian barrels carry a “relatively lower level of risk” for Chinese buyers compared to Iranian crude, said Lin Ye, vice president of oil markets at consultancy Rystad Energy, citing optimism about a possible ceasefire in Ukraine.