As the second-largest economy in the world, China imports record amounts from Russia to replenish its oil supplies.
According to Bloomberg data, the country imported an average of 1.66 million barrels per day from Russia in January according to Kpler data.
It was the highest import level since Russia invaded Ukraine one year ago. This caused huge disruption on global oil markets.
China’s escalating purchases of oil products is a result of its economic recovery following the lifting Covid restrictions at last year’s end. According to the International Energy Agency (IEA), global oil demand will rise to 101.9million barrels per day in 2017, largely due to China.
Beijing also takes advantage of the significant discount on Russian oil after Western sanctions.
Russia’s flagship Urals export grade averaged $49.48 (PS40.96 per barrel) in January, as compared to $82 for Brent Crude.
In December, the UK and EU banned Russian crude imports . G7 countries imposed price caps
G7’s price cap is designed to limit Russia’s oil sales worldwide and keep Russian oil flowing due to its importance in the global market.
Despite the increase in oil exports, Moscow’s oil revenues dropped 48 percent in January. According to the IEA in January, Russia exported 8.2 Million barrels per day of oil to global markets, an increase over the previous month.
After the Western boycott, the biggest buyers of Russian crude oil are now China and India.
The IEA’s monthly outlook report for February stated that Russia’s January output was just 160,000 barrels less than the pre-war level.
According to the IEA, output has “held up relatively well despite Sanctions”, so far.
Russia stated earlier this month that it would reduce its production by approximately 500,000 barrels per hour, or 5pc, to respond to price caps.
According to the IEA, “Nearly a whole year after Russia invaded Ukraine, global oil markets trade in relative calm.”
“Oil prices have returned to pre-war levels, with the exception diesel, but even those are much lower than last summer’s historic highs.
“The world’s oil supply appears to be higher than demand in the first half 2023. However, the balance could shift quickly to deficit once demand recovers and some Russian production is cut off.”