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Low-priced Russian Urals crude cargoes attract Chinese buyers for June deliveries

  • Author
  • Analyst Oceana Zhou    Staff
  • Editor
  • Wendy Wells
  • Commodity
  • Oil
  • Topic
  • War in Ukraine

Several Chinese state-owned refiners have returned to the Russian spot market to buy May-loading Urals crude barrels, attracted by their record discount to Dated Brent, refining sources told S&P Global Commodity Insights March 22.

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"We will have a cargo of Urals for delivery in June, the price is quite low," a source with a state-owned refinery in southern China said.

The discount for a Suezmax cargo of Urals against Dated Brent recovered slightly to $32.675/b on an FOB Novorossiisk basis March 21 from a record $33.36/b on March 15, S&P Global Commodity Insights' Platts assessment showed.

"The price of the cargo for CFR China is a discount of around $17/b, " the refining source said.

Other refining sources with Sinopec and PetroChina in the central, east, northeast and south of China said the price was attractive, with some saying the companies were looking for vessels to carry the barrels.

"One of the current problems is fixing a ship to carry Russian barrels, as not many shipowners are willing to take the risk," a refiner source with PetroChina said.

China had stayed on the sidelines of the Russian spot crude market for a while due to the payment and shipping uncertainties generated by the Russia-Ukraine war.

It was only around March 14 when India refineries were reported to have taken the crudes that sources with Chinese state-owned trading firms said China's crude buyers would return to the spot market to buy Russian Urals.

"We have to consider things at all levels, like whether the sanctions will be involved, as well as cargo insurance and loading issues," said Zhang Jing, senior analyst with Unipec, on the issue of whether Chinese companies would be interested in buying Russian seaborne cargoes.

Unipec is the trading arm of Sinopec, which is a leading Urals buyer in China.

China is likely to import about 3.52 million barrels of Urals in March, which were loaded in January and all taken by Sinopec, Kpler data showed.

Cargo arrivals in China in April, which were loaded in February, would rise to 4.03 million barrels, with Sinopec remaining the leading buyer, according to Kpler.

Independent Chinese refiners were also said to be have started taking Urals, with traders saying deals were being done quietly to avoid public attention.

The independent refineries were also re-emerging in the far eastern spot market for Russian ESPO as the market outlook was clearer, with firm offers shown.

Russia was the second-largest crude supplier to China in January-February, despite the delivery volume of ESPO, Urals, Sokol and Sakhalin Blend falling 9.1% year on year to 1.6 million b/d, data from China's General Administration of Customs showed.