Cargoes of Russia’s ESPO crude loading in May have been offered to China for payments in yuan, as the world’s top crude importer continues to purchase Russian oil but is constrained in bank guarantees by the Western sanctions on the Russian banking system, traders familiar with the matter told Bloomberg on Friday.
Unlike many oil customers in the West, China and another major oil importer, India, have not been shying away from Russian oil cargoes, all the more so that Moscow’s crude is now being sold at hefty discounts to Dated Brent.
According to Bloomberg’s trading sources, the Geneva-based seller of oil, Paramount Energy & Commodities SA, has recently allowed some customers in China to pay in yuan.
Several independent refiners in China have bought the ESPO cargoes for May loading at Russia’s Far East ports, but it was not immediately clear whether the payments have gone through or settled in Chinese yuan, the sources told Bloomberg.
For China and for India, who haven’t steered clear of Russian cargoes so far, Russian oil - at times being sold at a record $35 per barrel discount to Dated Brent - is too cheap to resist, considering that the international oil benchmark has more or less stayed above $100 a barrel since the Russian invasion of Ukraine at the end of February.
Since the sanctions against Russia over its war of Ukraine limited the Russian trade in U.S. dollars, there have been reports that the importers not shunning Russian oil—China and India—could start settling some transactions in the local currencies of the importing countries, the Chinese yuan or the Indian rupee, respectively.
For the time being, India will not pay in rupees for oil from Russia or any other oil exporter, the junior petroleum minister of the world’s third-largest oil importer said earlier this week.
“At present, oil public sector undertakings neither have any contract nor is any such proposal under consideration from Russia or any other country for purchase of crude oil in Indian rupees,” Indian junior oil minister Rameswar Teli told Parliament today, as carried by Reuters.