Russian Urals Oil Breaks Records For Exports To China
Export records were made against the background of an unprecedented drop in demand for oil in the world due to the coronavirus pandemic, which naturally causes some surprise. Unfortunately, it is too early to draw far-reaching conclusions. The avalanche-like increase in demand for Russian oil in China was caused by a successful situation on the world market and a drop in consumption within Russia.
In March, the total volume of all oil supplies from Russia to China increased by 31% year-on-year, and our country almost caught up with Saudi Arabia in terms of exports of "black gold" to China, shipping 7 million tons to the middle Kingdom against Saudi-7.2 million tons. In April, apparently, Russia has already bypassed its main competitor. Moreover, the main type of oil supplied to the Chinese market was the Urals, which was traditionally intended for Europe.
There are several reasons for what happened. First of all, oddly enough, the coronavirus tried.
"China was the first to go through the COVID-19 epidemic, started lifting restrictions and restoring oil refining. Respectively, which fell in February crude oil imports in March began to recover," - says the analyst of "Finam" Alexey Kalachev. He also stressed that Chinese consumers could take advantage of the favorable low price in the market and increase purchases of cheap oil to create reserve reserves.
The second reason lies in the taxation of Chinese oil refineries (refineries) and pricing in the domestic fuel market. In China, gas station prices depend on oil prices. But only as long as "black gold" is worth more than $40 per barrel. If the price of oil falls below, the price tags at gas stations stop changing, and the profit of the refinery begins to grow. Naturally, in such conditions, Russian oil prices in the range of 15-25 dollars per barrel were very profitable for Chinese refineries to make reserves.
In addition, the Russian brand of Urals oil is suitable for a large number of Chinese plants for its quality characteristics. It does not have to be diluted with other grades of "black gold," which also significantly reduces the cost of processing raw materials.
Another factor that indirectly influenced the increased popularity of Russian oil in China was the drop in demand for it, both within Russia and in Europe. As follows from the Argus report, compared with the first three months of this year in April, the load of Russian plants decreased by 430 thousand barrels per day. The released volumes, as a result, were redirected to China, at very attractive prices for the Middle Kingdom. It is also worth considering that Russian oil has enviable logistical advantages for export to China. Only the Eastern Siberia Pacific Ocean (ESPO) pipeline, excluding tanker deliveries from the port of Kozmino, can ship 30 million tons of oil per year. Now, after a sharp rise in the price of oil tankers' freight, pipeline deliveries of "black gold" have become much more profitable for both suppliers and buyers.