The Ukraine and Russia war is entering its fourth month, and while the West piles on sanctions against Russia, isolating its economy and deepening its ties with Ukraine, nations like India and China have snapped up the heavily discounted and “canceled" Russian oil. According to customs data, in May, China’s imports from Russia surged 80% year on year to US$10.27 billion.
The increase in Chinese demand also comes as virus controls have loosened, meaning that factories could somewhat resume operations. Crude imports increased 55% from a year earlier to 8.42 million tons. So with that, Russia has overtaken Saudi Arabia to become the world’s second-largest economy’s primary oil provider.
“The expectation that Russian crude would cease to be traded on international markets has not transpired, and instead the steep discount on Russian crude has seen vessels redirected to alternative markets," said Wei Cheong Ho, vice president of downstream at consultancy Rystad Energy. “While the cost of financing these vessels and trades has increased significantly due to be freezing out of the Western financial system, the discount on Urals is too attractive for some refiners to ignore," he said.