Further eastward Russian oil is putting pressure on Iran’s crude sales to China

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LONDON – Iran’s crude exports to China have plummeted since the start of the Ukraine war, as Beijing stores about 40 million barrels of Iranian oil in tankers at sea and searches for buyers, in favor of massive discounts on Russian barrels.

U.S. and European sanctions imposed for Moscow’s attack on Ukraine on February 24 have pushed Russia’s crude oil east, where China has snatched it, reducing demand for oil from Iran and Venezuela, both of which are subject to Western sanctions.

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About 20 ships, including oil, from Iran anchored near Singapore by mid-May, according to shippers’ data.

Some tankers have been anchored since February but Iran’s oil reserves have risen sharply since April, trade and shipping sources said, as more Russian oil moves east.

Kpler data and analysis company said they estimated that the amount of Iranian oil in floating storage near Singapore increased from 22 million barrels in early April to 37 million barrels in mid-May.

The United States banned Russian oil imports shortly after the Moscow invasion, while the European Union is considering a phased embargo, pushing more Russian oil cargo to Asia.

“Russia could divert about half of its exports to Southeast Asia, especially China … and this is a major potential threat to Iran’s crude exports,” Hamid Hosseini, a board member of the Union of Iranian Oil, Gas and Petrochemical Exporters in Tehran, told Reuters. .

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Iran, whose oil industry has struggled for years under US sanctions over Tehran’s nuclear program, has long relied on buying Chinese oil to keep its economy afloat.

In March, Iran’s exports to China were estimated at 700,000 to 900,000 barrels (bpd) per day, according to data from the Information and Consulting Agency.

But in April that export was estimated to have fallen between 200,000 and 250,000 bpd, according to Iman Naseri, managing director of FGE Consulting Middle East, who suggested a one-fourth or one-third reduction.

Kepler said Iran exported an average of 930,000 bpd, mainly to China in the first quarter, while its initial estimate for April was 755,000 bpd, although it said the estimate could be revised due to difficulties in tracking Iran’s sales.

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Trade under approval

“China is now obviously buying more (Russian) Ural cargo. Ural exports to China have more than tripled. This is despite the weakness of Chinese imports, “said Homayun Falakshah, a senior Kepler analyst.

China, where total oil imports have recently declined due to the Kovid-19 ban, is the largest buyer of Russian ESPO blend crude products.

Three sources told Reuters that Iran and Russia have been in close contact in recent weeks to discuss how to trade oil under sanctions. A source said the Russian side wanted to know how Iran navigated transport, trade and banking, while the two sides also discussed joint ventures, banks and fundraising.

Another source said further talks were planned when Russian Deputy Prime Minister Alexander Novak visited Iran next week.

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But negotiations have not made it easier to find buyers for Russian Ural and Iranian crude, which are usually heavier with higher sulfur content, making them more expensive to process than Russian oil.

“No one is looking at Iranian crude oil anymore because Russian grades are much better and cheaper. Iranian oil sellers are under a lot of pressure,” said a trader at a Chinese refinery.

He said the Urals supplied to China were selling at ছ 9 a barrel in Brent for June delivery, so Iranian barrels had to offer a থেকে 12 to $ 15 discount to compete.

“You can legally buy Russian oil, but Iranian oil is going to be the subject of sanctions, so naturally people go for the easy option,” said a European businessman, referring to the US sanctions on Iran’s exports.

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Russian oil and refined products are flowing into other markets, particularly India and the United Arab Emirates (UAE).

The arrival of Russian fuel oil in the UAE’s storage hub in Fujairah will rise to about 2.5 million barrels in May, about 125% higher than the April level.

India, meanwhile, has increased its crude purchases from Russia. In early June, India will import more than 30 million barrels in the last three months, more than double the total imports by 2021, according to Kepler. Additional reporting by Rowena Edwards in London, editing by Edmund Blair and Mark Potter)

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