Chinese demand is fading: the finest hour of Russian oil has passed

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, commented on the future prospects of Russian oil on the Chinese market to the Neft and Capital Internet portal.

According to Alexey Gromov, the slowdown in oil demand in China will be very noticeable in the coming years. This will put pressure on Russian exports. The record that was set for shipments from Russia to China in the amount of 108 million tons is unlikely to be repeated. Even by the end of this year, about 100 million tons are expected.

"Russia, of course, has some advantages — these are long-term contracts for the supply of about 30 million tons per year of ESPO oil through the pipeline and about another 12 million tons in transit through Kazakhstan. These volumes will definitely last 10-15 years. But sea shipments will face growing competition with countries from the Persian Gulf, especially with Saudi Arabia, which has been offering discounts to its customers in the last three months," the expert explained.

Alexey Gromov stressed that China would be happy to continue choosing Russian ESPO varieties (given that it was a premium to Brent, and because of the sanctions it is sold at a discount), as well as ARCO. However, in general, we should not expect an increase in Russian oil supplies to China, they will at best remain at the same levels as they are now.

"There is a tendency to fill reserves in China, which has been actively replenishing its strategic reserve in recent years. According to indirect data, it already surpasses reserves in the United States. Beijing is increasing its capacity to accumulate such reserves, but it is unclear how long it will do so. For Russia, the issue of maintaining its share in the Chinese market will rest on its willingness to make discounts on offshore oil supplies, which may become necessary in 2026 in conditions of oversupply," Alexey Gromov concluded.