Refiners have reportedly increased purchases as latest EU sanctions are about to kick in © Getty Images / VCG / Contributor

China’s oil refiners have started to snap up Russian crude shipments amid sharply lower prices and the looming EU price-cap measure, Bloomberg reported on Friday.

According to its report citing anonymous traders, Chinese private processors, or teapots, purchased several cargoes of Russian ESPO crude for December-January arrival. The shipments traded at wider discounts to global benchmark Brent crude than deals done just weeks ago, the traders explained.

“It is also believed that the cargoes were bought in Chinese yuan rather than US dollars, and financed through local banks and institutions,” Bloomberg wrote.

The reports of increased Chinese oil purchases from Moscow come in the run-up to December 5, when the European Union rolls out new sanctions that will ban the bloc’s oil sector from extending shipping, insurance and banking services to Russian oil trades, unless they comply with a yet-to-be-determined price cap.

The report indicated that traders are interested to know if China and India can continue to purchase Russian crude, and whether the countries will utilize a proposed price cap or turn to non-EU providers.

China wants more Russian gas – CNPC China wants more Russian gas – CNPC

“In this case, the final price of the cargoes will not be known until a much later date. That’s because the deals are done against the average of Brent’s front-month February contract, which can only be tabulated at the end of December,” Bloomberg wrote, adding it’s unclear whether the shipments will load before or after the December 5 deadline.

Traders reportedly said that teapots weren’t too concerned if their tanker loads would be hit by EU sanctions or meet the criteria for the cap. They explained this by saying their purchases were being made on a delivered basis, which leaves the responsibility of shipping and insurance with sellers.

On Friday, the EU reportedly tentatively agreed on a $60-per-barrel price cap on Russian seaborne oil as it aims to curb the Kremlin’s revenue from energy exports. Moscow has earlier threatened to stop shipping oil to countries that support the price-cap measure.

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