Russian and Iranian Oil Discounts Target Chinese Buyers Amid Indian Withdrawal

In response to India's reduced oil purchases, Russian and Iranian producers are offering discounts to a limited number of Chinese buyers. This shift has led to a significant increase in Russian oil deliveries to China, while Iranian exports have declined. The competition between these two nations is intensifying, with price wars emerging as Chinese private refineries struggle to absorb the surplus crude. As unsold oil accumulates in Asian waters, the dynamics of the oil market are shifting, raising concerns for Iranian suppliers. Discover the implications of these developments on the global oil landscape.

By Narendra Chaudhary Feb 26, 2026, 15:48 IST

Oil Market Dynamics Shift

Following India's reduction in oil purchases, Russian and Iranian producers are reportedly providing discounts to a select group of Chinese buyers. Projections from Rystad Energy, as reported by Bloomberg, suggest that India's imports from Russia may decrease by 40% from January levels, dropping to approximately 600,000 barrels per day. This shift has led to a surge in Russian cargoes heading east, igniting a price competition with Iranian suppliers, who have traditionally been favored by Chinese private refineries.

Independent Chinese refineries, often referred to as teapots, have historically absorbed oil that other buyers avoid. However, their limited capacity has intensified the price war between China and Iran. Currently, Russia's Urals grade is priced about $12 per barrel lower than ICE Brent, an increase from a $10 discount last month. Meanwhile, Iranian Light is being sold at a discount of up to $11 compared to the global benchmark, widening from the previous $8 to $9 range, according to traders familiar with the transactions.

As China struggles to fully absorb the surplus crude, unsold oil is accumulating in Asian waters, leaving Russia and Iran with dwindling options. Jianan Sun, an analyst at Energy Aspects, noted that Chinese private refiners are nearing their maximum capacity. The report indicates that Iran is facing challenges as Russia increases its market presence. In the first 18 days of February, Russian oil deliveries to Chinese ports surged to 2.09 million barrels per day, marking a 20% rise from January and nearly a 50% increase from December. In contrast, Iran's exports to China have fallen to about 1.2 million barrels per day, a 12% decline compared to the same period last year.

Moreover, Russian oil is perceived to carry a 'relatively lower level of risk' for Chinese buyers compared to Iranian shipments, particularly due to the optimism surrounding a potential ceasefire in Ukraine, as indicated by sources in the report.