Big discounts help Moscow overtake Saudi Arabia in exports to the world’s biggest crude consumer
Russia became China’s top oil supplier in May, with exports soaring 55% from last year, Reuters reported on Monday citing data from the Chinese General Administration of Customs.
According to the report, imports of Russian oil to China last month amounted to nearly 8.42 million tons, or 1.98 million barrels per day, including volumes pumped via the East Siberia Pacific Ocean (ESPO) pipeline and shipments from Russia’s European and Far Eastern ports. The 25% increase from April enabled Russia to displace Saudi Arabia to become China’s largest oil supplier.
China slashed its imports of Saudi oil to 7.82 million tons, or 1.84 million barrels per day, down from April’s 2.17 million bpd. Brazil’s supplies dropped by 19%, amounting to 2.2 million tons. Despite the lingering Covid-19 related drop in demand, China’s overall oil imports rose nearly 12% in May year-on-year to 10.8 million barrels per day.
The surge in China’s purchase of Russian oil comes after Moscow introduced heavy discounts on its crude earlier this year, after Russia’s traditional buyers started snubbing exports due to Ukraine-related sanctions.
Since the end of February, the US, the EU and their allies have introduced restrictive measures on the supply of Russian energy. In early June, the EU approved a package of sanctions prohibiting the purchase of oil from Russia and banned “insurance and reinsurance of maritime transportation of such goods [oil and oil products] to third countries.”
However, discounts offered by Moscow attracted China and India, which stepped up purchases over the past two months. According to RBC, in March the average discount on Russia’s flagship Urals crude was about 20%, in April – 33%, although in mid-May the average monthly cost on the fuel rose by nearly 20%.
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