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In recent months, Russia's Sokol crude has faced a major backlog, with tankers carrying as much as 18 million barrels of the oil stranded off the coasts of Singapore and South Korea.

This backlog stemmed from Indian refiners avoiding the grade due to tightened sanctions enforced by the United States. However, there's a silver lining on the horizon as this backlog is slowly but surely clearing.

China's Emergence as a Key Importer

Bloomberg tells us that China has emerged as a key importer of Sokol crude, offering hope for clearing the stranded oil. Chinese refiners, particularly private ones known as teapots, are showing interest in Sokol crude, with several shipments expected to arrive in February and March.

This shift in demand is crucial in alleviating the backlog, as traders note that almost half of the stranded oil is now idling off China's shores, awaiting more buying interest.

According to the report, Chinese refiners are comparing Sokol crude to ESPO, another Russian grade that dominates their market. When processed, both kinds produce significant quantities of diesel, making Sokol competitive with other grades. Offers for prompt Sokol supply are being pushed at a slight discount to Brent crude, making it an appealing choice for Chinese refineries.

Challenges and Hesitations

Despite the promising developments, there are still challenges to overcome. Some hesitation persists among Chinese entities, including ports and banks, regarding vessels involved in the last round of US sanctions. This hesitance could slow down the process of clearing the remaining backlog.

While China emerges as a key importer, efforts to restore trade with India continue. A few Sokol-hauling tankers that initially turned away from India have returned, with the first discharge occurring at the port of Vadinar. However, restoring trade with India proves challenging, leaving Russia needing alternative buyers.

Tags

Russia, China, Oil