Discounts for Russian ESPO Blend crude loading in January have widened to a record $7 to $8 per barrel versus ICE Brent upon delivery in Chinese ports, three traders said on Tuesday, as Western sanctions pressure weighs on the grade.
The deeper discounts have revived buying interest, particularly among China's private independent refiners, known as "teapots".
Earlier in December, ESPO discounts at Chinese ports were around $5 to $6 per barrel as refiners stayed away following harsh Western sanctions targeting Russian oil majors Rosneft and Lukoil, the traders said.
Private refiners have since returned to the market, lured by cheaper barrels and new import quotas issued and to be issued soon by Beijing.
China's state refiners, however, are still avoiding buying Russian crude on the spot market, putting pressure on ESPO Blend oil values. And plentiful supplies of Iranian oil sold at wider discounts, meanwhile, have also increased competition with ESPO.
ESPO Blend, a light sweet crude exported via Russia's Far East ports, is a crucial feedstock for Chinese refiners due to its short shipping distance and good quality.
Discounts have widened from low single-digit levels earlier this year, reflecting softer demand and sanctions-related constraints on Russian oil flows.
Western sanctions are also weighing on Russian flagship Urals oil values. A number of Urals cargoes loading from Russian ports this month had to divert to China due to weaker Indian buying, traders said.
Discounts for Urals crude cargoes in Chinese ports have exceeded $10 per barrel versus ICE Brent for December loadings from Russian ports.
Western sanctions have complicated payments and shipping for some buyers, but ESPO and Urals remain attractive for smaller refiners seeking prompt cargoes, the traders said.
China is Russia's largest oil customer, and wider discounts could support Russian exports into early 2026 even as sanctions limit Moscow's ability to sell oil.
(Reporting by Siyi Liu in Singapore and Reuters reporters in Moscow; Editing by Joe Bavier)