Surplus Russian oil: why Urals is getting cheaper and where Moscow is redirecting its exports
22 January 16:40
Prices for Russian Urals crude oil supplied to China have fallen sharply—by about $10 per barrel, to around $55. This is the lowest level in a long time for this supply route.
This was reported by Bloomberg, citing market sources, according to "Komersant Ukrainian".
What is the reason
The key factor was a sharp decline in demand from India, one of the two largest buyers of Russian oil after the start of the full-scale war against Ukraine.
- In December, oil imports to India fell to their lowest level in three years
- Total oil exports from Russia fell to their lowest level since August
- Moscow faced logistical and pricing difficulties in the Indian market
For Urals, this means oversupply and pressure on prices.
Why China is winning
India’s declining interest has opened up opportunities for Chinese refiners, which previously bought Urals in limited quantities.
China usually prefers Russian ESPO oil, which is supplied from the Far East. Urals, on the other hand, is exported from western Russian ports, which is less advantageous in terms of logistics.
However, the situation has now changed:
- significant volumes of Urals have accumulated on tankers
- some of them are in regions that are relatively accessible to China — the Strait of Singapore and the Yellow Sea
- the reduced price has made this oil competitive for Chinese refineries
What is happening with the surplus
According to Kpler, the volume of Urals stored on tankers has exceeded 13 million barrels — the highest level in at least a decade.
- Almost half of this is in the Arabian Sea.
- About 20% is near routes to China
This puts additional pressure on sellers and forces Russia to agree to discounts.
Consequences for the market
As a result, China has increased its purchases:
- Urals imports to China have grown to about 400,000 barrels per day
- this is the highest figure in the history of observations
At the same time, the situation illustrates Russia’s growing dependence on a limited circle of buyers and its vulnerability to changes in demand in individual markets.
