Discounted barrels find a new home
Russian crude shipments to China are on track to hit 2.07 million barrels per day in February, according to Kpler tracking data. That is a third straight monthly increase and a fresh record, up sharply from 1.7 million bpd in January.
The surge comes as India pulls back. New Delhi has cut Russian crude imports to roughly 1.16 million barrels per day, the lowest in two years. Western sanctions and pressure from Washington tied to trade deal negotiations forced the shift. China, facing no such constraints, has stepped in to absorb the excess.
Deep discounts sweeten the deal
Russia is selling Urals crude at $9 to $11 below Brent, one of the steepest discounts in recent years. Chinese independent refiners, known as "teapots," have been snapping up cargoes at those prices.
Moscow is also shipping ESPO blend, Sokol, and Varandey grades to Chinese ports. Since November, China has replaced India as Russia’s top client for seaborne oil, a shift that has reshaped trade flows across Asia.
Brent crude traded at $67.88 per barrel on Monday. The IEA warned last week that global supply could exceed demand by 3.7 million bpd this year, a surplus that cheap Russian oil flowing east does nothing to ease.
Revenue crunch despite record volumes
Volume alone has not saved Moscow’s finances. Russia’s oil revenue in January fell to its lowest level in more than five years, squeezed by the combination of heavy discounts and sanctions-related shipping costs. Analysts describe the economy as entering its deepest crisis phase in two decades.
The DROP Act, a new sanctions bill unveiled February 11 by Republican Congressman Michael McCaul, would go further. It targets any foreign entity involved in purchasing or facilitating Russian crude sales, aiming to close loopholes in the current regime.
What it means for markets
The redirection of Russian barrels from India to China does not remove any oil from the global market. But it tightens the web of sanctions evasion that Western governments are trying to unravel.
For OPEC+ members weighing an April production restart, the picture is complicated. Cheap Russian crude competing for market share in Asia makes it harder for Saudi Arabia and other Gulf producers to raise output without driving prices lower.