China buys Russian oil at multi-month low discounts, brushes off price cap - Reuters

SINGAPORE, Dec 8 (Reuters) - China is paying the deepest discounts successful months for Russian ESPO crude lipid amid anemic request and mediocre refining margins adjacent though the effectual prices refiners wage could transcend a terms headdress imposed this week by Western countries.

The $60 per-barrel cap, acceptable by the Group of Seven (G7)nations, the European Union and Australia, took effect connected Monday to bounds Moscow's powerfulness to concern its warfare successful Ukraine, though Russia has vowed to defy it.

China, Russia's apical lipid buyer, has not agreed to the terms cap. Traders said they were doing concern arsenic usual.

China's autarkic refiners, ascendant clients of ESPO, a people exported from the Russian Far East larboard of Kozmino, unafraid the shipments astir each connected delivered ground from traders who put shipping and insurance, shielding the refiners from imaginable secondary sanctions that whitethorn effect from the terms cap.

The airy saccharine crude is favoured by Chinese refiners owed to their proximity and the oil's precocious middle-distillates yield.

But the Chinese government's zero-COVID argumentation has weakened the country's system and request for crude.

At slightest 1 December-arrival ESPO cargo was sold past week to an autarkic refiner astatine a discount of $6 per tube against the February ICE Brent terms connected the delivery-ex-ship (DES) basis, according to 4 traders with cognition of the deal.

That compares with a premium of astir $1.80 per tube 3 weeks ago. At existent Brent levels, the $6 discount implies a terms of $68 a tube including freight and security costs.

"They (independent plants) don't truly attraction astir the terms cap. All they bash is crunch the numbers to spot if the delivered prices marque bully nett oregon not," said a trading enforcement with 1 autarkic refiner.

"Domestic refining margins are inactive struggling," the enforcement added.

On Thursday, determination were inactive 2 December-loading cargoes unsold, and offers had fallen to discounts of astir $7 to $8 a barrel, 2 trading sources said.

Some aboriginal trades of January-loading cargoes were done astatine $4 a tube beneath the March ICE Brent, the lowest level for beforehand period ESPO since July.

Benchmark Brent slid to its lowest since January connected Tuesday astatine beneath $80.

Traders said ESPO's cheapness could soon pull caller buying from Chinese buyers connected hopes that Beijing's relaxation of pandemic controls implicit the past week could reignite demand.

"It could beryllium expected that immoderate buyers of Russian crude mightiness instrumentality a cautious attack successful the archetypal fewer weeks, reducing imports until the ineligible implications of specified commercialized are clearer," said Rystad Energy analysts Viktor Kurilov and Jorge Leon successful a enactment connected Tuesday.

With the terms headdress successful place, China, India and Turkey could person much bargaining power, the analysts added.

In Shandong, a state with galore autarkic refiners, known arsenic teapots, ESPO is besides facing expanding contention peculiarly from Iranian oil, which traded astatine a discount of astir $10 against ICE Brent past week.

Tanker tracking specializer Vortexa Analytics estimated that Chinese imports of Iranian oil, passed disconnected arsenic supplies from specified exporters arsenic Malaysia and Oman, whitethorn person deed a monthly grounds of astir 4.7 cardinal tonnes successful November.

Reporting by Muyu Xu and Chen Aizhu; Editing by Bradley Perrett

Our Standards: The Thomson Reuters Trust Principles.