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US NEWS 
- Strong demand for Russian oil from China to replace Mideast supply
- Two Chinese refiners buy most of the September-loading ESPO
- Some independents seek to resell Mideast crude for profit
- Chinese refiners in talks to buy cheaper Iranian oil
SINGAPORE, July 23 (Reuters) – Some Chinese refiners have ramped up purchases of sanctioned Russian crude despite shrinking discounts, as an escalation in the Iran war disrupts exports from the Middle East, sources familiar with the situation said.
Chinese independent refiners made rare purchases of non-sanctioned Middle East crude at wide discounts when exports gushed out during the short-lived truce between the U.S. and Iran.
A resumption of attacks and shipping blockades in the Strait of Hormuz is again throttling oil shipments through the crucial waterway, and Yemen’s Iran-aligned Houthis are also threatening to block Saudi oil exports from the Red Sea.
Faced with disruptions, Chinese refiners recently snapped up crude from their biggest supplier Russia and resumed talks to buy Iranian oil, traders said.
Two major Chinese refiners bought most of the Russian ESPO Blend crude loading from the Pacific port of Kozmino in September, three trade sources said.
Two of them said the cargoes were sold at a discount of $1 to $3 per barrel to ICE Brent, compared with a discount of around $4 per barrel for August-loading ESPO. Robust demand from India, another major Russian oil buyer, has supported prices.
An executive at India’s Bharat Petroleum Corp (BPCL.NS) said on Thursday that the refiner has raised Russian oil processing in the June quarter and added that traders are not offering discounts on Russian crude sales.
“Given the uncertainty in the Middle East, ESPO is a safer bet, and it is also cheaper,” said one of the sources who is a trader with a Chinese refiner.
SHANDONG TEAPOTS IN TALKS FOR FRESH IRANIAN OIL CARGOES
Independent refiners, also known as teapots, in eastern China’s Shandong refining hub are discussing deals with Iranian oil sellers, the sources said.
This week, Iranian Pars crude, a heavy grade, was sold at a discount of about $8 a barrel to ICE Brent for delivery to Shandong, widening from an earlier offer of about $6, one of the traders said. Offers for Iran Light have also slipped to discounts of about $3 to $4 a barrel compared with about $3 last week.
Teapots are not in a rush to buy crude as their refining margins have worsened with Brent surging to nearly $100 a barrel, the sources said.
The independent refiners had previously bought around 20 million barrels of Middle Eastern crude for loading in July to August, with some of them looking to resell the oil this week for profits, traders said.
The cargoes had been offered to end-users in neighbouring countries including Taiwan and South Korea at premiums of $6 to $9 per barrel to Dubai benchmark on delivered basis, two traders said. It was not immediately clear if any deals were concluded.
Reporting by Siyi Liu in Singapore; Additional reporting by Florence Tan and Trixie Yap; Editing by Joe Bavier
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