Russian oil is being sold at a steep discount because of the risks associated with sanctions imposed to punish Russia for its invasion of Ukraine. Even so, soaring energy prices have led to an uptick in oil revenue for Russia, which took in $1.7 billion more last month than it did in April, according to the International Energy Agency.
Although it remains to be seen how much Asia will continue buying the oil as Europe weans itself off Russian energy, the shift has allowed Moscow to maintain its production levels and defy analysts’ expectations that its output would plunge. And it has offered another indication of the support Russia enjoys from China, whose top leader, Xi Jinping, has offered to deepen cooperation with Moscow despite its invasion of Ukraine.
Russian crude sales dropped by 554,000 barrels a day to Europe from March to May, while Asia refiners increased their take by 503,000 barrels a day — nearly a replacement of one for one. Of those, 165,000 barrels are going to China from eastern Russian ports instead of the Baltic and Black Sea ports that traditionally supply Europe. Russian sales to India reached a record 841,000 barrels a day in May, eight times the annual average from last year.
J.P. Morgan commodities experts estimate that China can buy an additional million barrels of Russian crude a day as China recovers from Covid and attempts to add to its strategic crude stockpiles on the cheap. Russian Urals crude is selling for a $30 discount to Brent.