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Russell: China is shifting its crude oil purchases in response to the price rally.

China's role in setting the?floor and the?ceiling for crude oil prices is one of the less?discussed dynamics of the global market.

When prices are low, the world's biggest crude importer will buy excess oil and build up its inventory.

Analysts and journalists covering the crude oil market are not aware of the changes in imports because they occur with a delay of several months.

There are early signs, however, that China will shift its imports in favor of crudes with more competitive prices, and also reduce imports starting April.

The reason for this is that crude oil prices are rising sharply, amid tensions between Iran and the United States. There's also concern about retaliation by Iran against oil tankers and installations in the Persian Gulf region if a U.S. strike occurs.

Brent crude futures reached their highest level in almost seven months on the 23rd of February, reaching $72.50 per barrel. They have risen 23% from the low point of $58.72 set on December 16th.

Brent's rise has led to crudes from West African producers Nigeria and Angola being priced more expensive relative to Brent.

This has in turn led to producers offering larger discounts to clear their cargoes. Traders report that some West African grades have been sold at up to $5 per barrel discount over the Dated?Benchmark Brent, up from $3 earlier this month.

China is often viewed as the buyer of last recourse for West African crudes. The high discounts offered show that there is a limited appetite for additional cargoes.

The cost of landing West African crude oil in China is also increasing due to higher freight rates, particularly since Middle East producers are lowering their prices.

Saudi Arabia, world's biggest oil exporter has cut its official selling prices (OSPs) for its main Arab Light grades for Asian refiners by a further month for cargoes loaded in March.

According to data, the March OSP for Arab Light Crude was equal to the Oman/Dubai Average, down from $0.30 per barrel in February. This is the lowest premium since December 2020.

China has responded to the Saudi oil crisis by purchasing more crude and other grades of similar grade from Gulf producers.

AFRICA DIP

The data from commodity analysts,?Kpler, also shows that China is reducing its cargoes coming from Africa. Arrivals in February and march were below the levels of the fourth quarter last year.

According to Kpler, China's imports of oil from Africa will be 1.04 million barrels a day in March, and 978,000 in February. This is down?from 1.2 million barrels a day in the fourth quarter 2025.

Due to similar API gravity and sulphur content, there is a high degree of fungibility among grades like Angola Cabinda and Nigeria Bonny Light.

A grade similar to Urals is Russia. China is buying cargoes with heavy discounts, after India, the other major Russian buyer agreed to buy less sanctioned crude as part of an agreement reached with the United States.

China's imports from Europe of Russian crude, where Urals -loads - are located, is expected to reach 824,000 barrels per day (bpd) in February. This represents an increase from 741,000 barrels per day in January, and 444,000 in December.

China appears to be buying Russian crude at a discount and reducing its consumption of Brent, which is more expensive.

It may also be reducing the volume of imports due to the recent price rise, as it did in the 12-day conflict between Israel and Iran in June, last year, which was supported by the United States.

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These are the views of the columnist, an author for.

(source: Reuters)