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Despite Russian shipments falling from all-time highs as a result of narrower discounts and increased local demand, Russia continued to be China’s top oil supplier in July, according to figures released by the Chinese government on Sunday.
According to figures from the General Administration of Customs, arrivals from Russia increased 13% from the same month last year to 8.06 million metric tons, or 1.9 million barrels per day (bpd), in July.
Russian arrivals for the first seven months of the year increased by 25% from the same period last year to 60.66 million tons.
With 5.65 million tons, Saudi Arabia’s shipments were down 31% from June and 14% from a year earlier.
Although Riyadh increased the official selling price of its flagship Arab Light oil to Asian importers in July to a six-month high, it was anticipated that Saudi exports to Asian refiners would decline in July. Saudi Arabia also made plans to further reduce output in July, dropping it from 9.96 million bpd in June to 9 million bpd in July.
Russian ESPO grade crude has traded closer to benchmark grades despite ongoing Western sanctions and a price cap on Russian imports, as robust demand from Indian and Chinese importers erodes the sanctions discount.
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Domestic Demand Reshapes Russian Crude Exports
July delivery According to trading sources, ESPO shipments were priced at a $5–6 per barrel discount to the ICE Brent benchmark, as opposed to $8.50 against ICE Brent for shipments delivered in March.
It was anticipated that increased domestic demand in Russia would result in a general reduction in exports. According to estimates, shipments from western Russian ports decreased 18% month over month in July due to an increase in domestic refining demand.
To avoid breaking Western sanctions, Chinese refiners arrange the shipment and insurance of Russian petroleum through middlemen traders.
To offset decreasing imports from Saudi Arabia and Russia, alternative suppliers have experienced an increase in their market share. To reach 574,581 bpd in July, Angola’s shipments increased 27% from the previous month.
Notwithstanding geopolitical unrest, U.S. exports to China increased fivefold from a year earlier, continuing the trend from the previous month, as U.S. WTI output continues to soar in response to OPEC+ supply restrictions. As arbitrage margins shrunk, U.S. crude shipments to China dropped to 161,275 bpd in July from 742,824 bpd in June.
In July, imports from Malaysia increased 16% year over year to 911,926 bpd. For cargoes from Iran and Venezuela that are subject to sanctions, Malaysia is frequently employed as a middleman.
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Source: Reuters
