China bought a record amount of Russian oil cheaply

China is buying Russian oil in record volumes despite slow economic growth. He uses this moment because it costs him much less than raw materials from Saudi Arabia and other countries, analysts say.

According to Financial Times calculations based on customs data, China set two records – half-yearly and monthly. In the first half of 2023, the average daily import from Russia was 2.13 million barrels. As a result, it overtook Saudi Arabia again, from which it bought 1.88 million barrels each (both countries have changed places as China’s main supplier several times in recent years).

At the same time, in June, imports from Russia turned out to be the highest in history – 2.57 million barrels, compared to 2.3 million in May, when the previous monthly record was broken.

According to Chinese customs data, since the beginning of the war in Ukraine, Russian oil has been much cheaper than raw materials from other OPEC+ countries. The most expensive period of oil sales by Russia was in March-April 2022 – slightly over USD 105 per barrel; but then the volumes were different – only 1.5-1.6 barrels per day. Meanwhile, on the world market during these two months, Brent was trading at USD 100-140.

Other OPEC+ countries sold oil to China for about $110-113 in the first two months of the war, and almost $120 in summer. The Russian price was already declining, dropping to $92.5 a barrel in August.

From December 2022, Western countries set the upper limit for the price of Russian oil at USD 60 per barrel. Although China buys it more expensive (it imports large quantities of Far Eastern ESPO grade, which sells above the ceiling), Russian oil has been getting cheaper for it almost every month since November, when it cost $89.2. While oil prices have also fallen in the global market, OPEC+ countries have not suffered as much: their supply prices to China are more or less stable this year.

Increasing Russian oil purchases is opportunistic, not systemic, says Michal Meydan, director of Chinese energy market analysis at the Oxford Institute for Energy Studies: “I don’t think China is ready to surrender to Russia completely. The withdrawal from Saudi supplies is a short-term phenomenon. The Chinese clearly care about maintaining a balance among suppliers.”