As China steps up its purchases of Russian oil, Iran has been forced to slash the price of its already cheap crude to to compete with Moscow's steep discounts, Bloomberg reported Monday.
Iranian oil is now priced $10 a barrel below global benchmarks such as Brent futures, commodities traders told Bloomberg. That represents a $5 to $6 price cut since February, when Russia invaded Ukraine.
Itself under US sanctions and on the hunt for crude buyers, Tehran is slashing its oil prices to compete with Russian crude in China.
Western nations have responded to the invasion by sanctioning Russia's oil exports, leading Moscow to price its crude exports at a steep discount in order to find buyers on the international market.
Russia's benchmark Urals crude oil currently trades at under $90 a barrel. That's $18 less than WTI crude and $22 below Brent crude, which are changing hands at about $108 a barrel and $111 a barrel, respectively.
China has taken advantage of that significant discount by loading up on cheap Russian oil. In May, Russia overtook Saudi Arabia to become China's largest oil supplier.
"The expectation that Russian crude would cease to be traded on international markets has not transpired," Wei Cheong Ho, vice president of downstream at Rystad Energy, said in June. "Instead, the steep discount on Russian crude has seen vessels redirected to alternative markets."
China imported 2.02 million barrels of Urals a day in May, according to the Chinese General Administration of Customs — a 55% surge in volume since May 2021.
By comparison, the Asian economic powerhouse took in just over 700,000 barrels of Iranian oil a day in both May and June, according to the commodity data firm Kpler.
Russia's oil export revenues have jumped despite the price discounts, hitting $20 billion in May from $18 billion in April as market prices surged, according to the International Energy Agency. Exports to India, which has stepped up its purchases of Russian crude, have helped cushion the impact of sanctions.
In March, US President Joe Biden announced a ban on Russian oil and gas imports, and the UK has also banned Russian supplies. The European Union has committed to an embargo on seaborne energy imports from Russia in its sixth round of sanctions.
