Discounts for Russian and Iranian have widened in recent weeks as China’s independent refiners have remained the only buyers not shunning sanctioned supply, which is amassing in floating storage at sea.
India’s pivot away from Russian crude oil has been a major hit to Russia’s already limited export markets. Now China remains the only “safe” market for Moscow to rely on.
But Chinese independent refiners in the Shandong province, the so-called teapots, continue to buy sanctioned Iranian supply, too, now that Venezuela’s crude is over the board and being sold by major traders picked by the U.S. Administration.
In this situation of limited export outlets for both Russian and Iranian crude, discounts have deepened for supply to China.
The Russian flagship Urals grade is currently being offered at about $12 per barrel below ICE , up from a discount of $10 a barrel in January, anonymous trades with knowledge of the deals told Bloomberg.
Iran, for its part, is offering Iranian Light at $11 a barrel below Brent, up from a discount of $8-9 per barrel seen in December, according to Bloomberg’s sources.
The two sanctioned producers are essentially competing for the Chinese private refiners’ market as China’s state majors have generally shunned Iranian and sanctioned Russian crude and India has retreated from the spot market for Russian barrels.
So far this year it looks like Russia is winning the contest. Up to February 18, deliveries of Russia-origin cargoes at Chinese ports averaged 2.09 million barrels per day (bpd) for the month—a record high, and up from an average of 1.72 million bpd in the full month of January.
Meanwhile, Iranian sales to China have slumped by 12% so far into 2026 from a year earlier, per Kpler data cited by Bloomberg.
The struggles of Russian and Iran to sell their crude have resulted in a massive piling of oil in floating storage.
