Russian oil discounts to China hit record as India demand risks mount

This week, Russian crude exports to China reached record discounts as sellers slashed prices to secure demand amid fears of declining Indian purchases. A trade agreement between the US and India hints at a potential halt to Indian imports of Russian oil, although specific details are still unclear. Analysts indicate that while independent refiners in China can absorb most of the displaced Russian crude, their capacity is not unlimited, and state refiners have largely paused their purchases. The discounts for Russia’s ESPO Blend have widened to nearly $9 per barrel against ICE Brent, while Urals crude discounts hover around $12. These significant price cuts could intensify competition within the Asian oil market while softening price pressures worldwide, contributing to volatility without leading to a structurally tight market. If India decreases its imports further, Russia may need to keep cutting prices, exporting deflation into physical markets.