(CTN News) – In 2023, Russia will overtake Saudi Arabia to become China’s top crude oil supplier, according to data releasedas China purchases discount oil for its processing plants despite Western sanctions.
The Chinese customs data show that Russia exported 107.02 million metric tons of crude oil to China last year, equivalent to 2.14 million barrels per day (bpd), far more than other major oil exporters like Saudi Arabia and Iraq.
Previously China’s largest supplier, Saudi Arabia’s imports fell 1.8% to 85.96 million tons as cheaper Russian oil took market share.
It is no secret that Russian crude oil traded at significant discounts to international benchmarks for much of last year as a result of Western sanctions over the Kremlin’s invasion of Ukraine in 2022.
The price of Russian ESPO crude soared from December 2022 through 2023 due to an increase in demand from Chinese and Indian refiners for discounted oil. As alternative shipping and insurance options proliferated to circumvent the sanctions, the Group of Seven’s $60 a barrel cap was breached.
According to sources, ESPO crude shipments for December delivery were priced at a discount of around 50 cents to 20 cents per barrel compared with a $1 premium for cargoes delivered in October and an $8.50 discount for cargoes delivered in March.
As a result, some refiners began looking for cheaper cargoes as Saudi Arabia raised its prices for its signature Arab Light from July.
Last year, Saudi Arabia and Russia, two of the world’s three largest oil producers, announced output and export cuts. Saudi Arabia rolled over a 1 million bpd cut in output this quarter, and Russia said it would reduce exports to 500,000 bpd from 300,000 bpd this year.
Russian crude is shipped and insured by intermediary traders on behalf of Chinese refiners in order to avoid violating Western sanctions.
In addition, buyers use Malaysia’s waters to transship sanctioned cargoes from Iran and Venezuela. A 53.7% increase was recorded last year in Malaysia-originating imports.
The Chinese reported no official shipments of Venezuelan crude in December despite the easing of U.S. sanctions on Caracas in October following a deal between President Nicolas Maduro and his political opponents.
Last year, U.S. crude oil shipments to China grew 81.1% despite geopolitical tensions between Washington and Beijing.
The total amount of crude oil imported by China in 2023 was a record 563.99 million metric tons, which is equivalent to 11.28 million barrels per day.