China disregards price caps and purchases Russian oil at multi-month low discounts
Due to weak demand and low refining margins, China is purchasing Russian ESPO crude oil at its lowest prices in months. An upper limit on pricing set this week by Western nations may not match the actual amounts refiners pay. On Monday, the Group of Seven (G7), European Union, and Australia-set $60 per-barrel cap went into force. The price of front month ESPO was the lowest since July in some early trades of January-loading ESPO cargoes, which were done at $4 per barrel less than the March ICE Brent. The $6 discount suggests that a barrel would cost $68 at current Brent values, including freight and insurance. On the assumption that Beijing's relaxation of pandemic regulations will rekindle demand, traders predicted that the low cost of ESPO will soon draw new purchases from Chinese consumers. Iranian oil is another source of growing competition for ESPO.