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Russia and Iran offer big crude discounts to China as India cuts Russian imports and Chinese refiners hit capacity, heightening market competition
India’s imports of Russian crude fell by about 40% after January, a reduction of roughly 6,00,000 barrels per day.
Signs of a fresh price war are emerging in the global oil market, with tankers loaded with crude idling along Asian sea routes as Russia and Iran offer steep discounts to secure limited buyers. A Bloomberg report published on February 25, 2026, indicates that competition to supply cheap crude oil to China is intensifying, driven in part by a sharp decline in India’s purchases of Russian oil.
India’s imports of Russian crude fell by about 40% after January, a reduction of roughly 6,00,000 barrels per day. Cargoes that would normally have gone to Indian refiners are now being redirected to China, triggering direct competition between Russian and Iranian suppliers in the world’s largest crude-importing market.
Russia’s flagship Urals crude is currently being offered at a discount of around $12 per barrel to ICE Brent, compared with about $10 last month. Iranian Light crude is being sold at discounts of up to $11 per barrel, compared with $8-$9 in December. Both producers are lowering prices to move sanctioned oil volumes, placing additional strain on revenues already pressured by production costs and geopolitical uncertainties.
Demand constraints in China are exacerbating the situation. Independent refiners, commonly known as “teapots”, account for roughly one-quarter of the country’s refining capacity and are already operating at near full utilisation. Larger state-owned refiners have also maintained distance from sanctioned Russian and Iranian crude.
Jianan Sun, an analyst at Energy Aspects, said private refiners are already running at full capacity and are unable to absorb additional supplies. As a result, sanctioned crude is accumulating both onshore and offshore, reflecting a widening imbalance between supply and demand.
Oil is increasingly being stored in ports, warehouses and tankers at sea as sellers struggle to secure buyers. Lin Ye, vice president of oil markets at Rystad Energy, said Chinese refiners currently view Russian crude as less risky than Iranian supplies because of expectations of a potential ceasefire in Ukraine. A ceasefire could reduce the likelihood of additional sanctions on Russia and ease complications related to payments, shipping and insurance.
By contrast, US sanctions on Iran remain stringent and the risk of military escalation continues to weigh on trade. This has led Chinese buyers to regard Russian crude transactions as comparatively more stable.
The imbalance has led to a sharp rise in floating storage. Data from Kpler shows that Iranian crude held in floating storage rose from about 33 million barrels at the start of February to roughly 48 million barrels. Major shipping corridors such as the Yellow Sea and the Singapore Strait are increasingly being used as temporary storage hubs.
Around 9.5 million barrels of Russian crude are also currently stored in Asian waters, underscoring the mismatch between supply and available buyers.
Despite the congestion, China’s intake of Russian crude remains strong. During the first 18 days of February, deliveries averaged 2.09 million barrels per day, up 20% from January and about 50% higher than in December. In contrast, China’s Iranian imports this year are averaging about 1.2 million barrels per day, roughly 12% lower than last year.
Iran is seeking to maximise exports amid concerns over possible US military action, while Russia faces production constraints that could affect its ability to finance the war in Ukraine.
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February 26, 2026, 17:19 IST
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