China Buys Up Russian Crude Shunned by India

• Since the U.S. has stepped up its enforcement of sanctions on Russian crude, a growing number of Russian crude cargoes have been idled off South Korea and Singapore.
• China has increased its purchases of Russia’s Sokol crude in recent weeks, taking advantage of India’s reluctance to buy the crude.
• China isn’t the only country interested in the crude, with a first tanker carrying Sokol being unloaded this weekend in Pakistan.

Stranded cargoes of Russia’s Sokol crude, previously headed to India but idled off South Korea and Singapore since the U.S. stepped up sanctions enforcement, have started to make their way to China, beginning to clear a backlog of more than 10 million barrels of the grade sitting on tankers at sea.  

China has increased purchases of Sokol in recent weeks and its independent refiners are expected to take several such shipments this month, traders have told Bloomberg, which also notes that tankers loaded with Sokol and idling offshore Singapore since December have started moving towards China’s shores.

The tougher enforcement of the G7 sanctions and related payment issues have been holding up Indian purchases of some cargoes of Russian crude oil, with tankers previously headed to India turning back eastwards, tanker-tracking data monitored by Bloomberg showed early this year.

At the end of last year, the United States took a tougher stance on the sanctions against Russia and sanctioned several vessels for violating the G7 price cap of $60 per barrel, above which cargoes cannot use Western insurance and financing. Some of those tankers were already en route to India loaded with Russia’s Sokol grade and departed from the Far Eastern ports in Russia.  

With Indian refiners shying away from the Sokol grade, Russia is now looking for alternative buyers for its crude. Some barrels appear to have been placed with private Chinese refiners, often referred to as teapots, while others wait for other takers.

According to Bloomberg, the first tanker carrying Sokol unloaded this weekend in Pakistan, at a refinery west of the capital city of Karachi.

Meanwhile, the largest state-owned refiners in India have become increasingly cautious about committing to contracted supplies of Russian crude, wary of potentially running afoul of the stricter enforcement of the U.S. sanctions on Russian oil exports, multiple sources with knowledge of the matter told Bloomberg last week.    [if !supportLineBreakNewLine] [endif]

By Tsvetana Paraskova for Oilprice.com

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