Russia Discounts Urals Crude for China Amid Indian Tariff Shift

Russia’s Urals crude grade, traditionally transported from western Russian ports to India, is now being offered at significant discounts to Chinese buyers. This shift comes in response to uncertainties surrounding Indian purchases of Russian oil following the imposition of additional tariffs by the United States.

The re-routing of Urals shipments to China marks a pivotal change in Russian oil export flows. Spot Urals cargoes are currently being marketed to Chinese importers, who usually prefer the Far Eastern grade known as ESPO. Reports indicate that Urals is now priced at a premium of $1.50 over London Brent, a decrease from the $2.50 premium observed last week.

Impact of U.S. Tariffs on Indian Imports

China remains the leading buyer of Russian crude, but its imports primarily consist of ESPO grade oil shipped from the Kozmino Port in the Far East. Urals, typically sent to India, has seen limited Chinese imports due to higher shipping costs and longer transit times. Recent changes in U.S. tariffs, however, have prompted a reevaluation of trade flows.

Following the announcement of a 25% tariff by U.S. President Donald Trump targeting India’s imports of Russian crude, major Indian state-owned refiners have begun to withdraw from spot purchases for cargoes scheduled to load in October. Sources familiar with procurement plans indicate that these refiners had secured at least 22 million barrels for delivery in September and October before the tariff threat emerged.

The new tariff, part of a broader 50% tariff on Indian goods, is set to take effect 21 days after August 6. The implications for Indian refiners are significant, as they navigate the complexities of international oil markets influenced by geopolitical shifts.

Even if China increases its purchases of Urals crude, analysts, including those from Bloomberg, suggest it is unlikely to fully absorb the volumes that Indian refiners have been importing. The evolving dynamics in the global oil market underscore the challenges and opportunities facing Russian oil exports in a rapidly changing landscape.