As oil’s slump threatens to plunge Russia into recession, President Vladimir Putin can at least rely on China to keep buying its crude.
The world’s biggest producer sold a record volume to its Asian neighbor last month, according to data e-mailed by the General Administration of Customs in Beijing today. Exports rose 65 percent from the same period last year to 3.31 million metric tons, or 810,000 barrels a day, as prices dropped to the lowest in four years.
China’s increasing demand for Russia’s oil is a boon to an economy weakened by U.S. and European sanctions over Ukraine and a collapse in the value of the ruble. The Asian nation is benefiting as benchmark prices head for their worst slump since the global financial crisis in 2008.
China’s purchases from Russia last month cost an average $90 a barrel, the lowest since December 2010, data compiled by Bloomberg show. Prices are sliding as the Organization of Petroleum Exporting Countries maintains its output quota to defend market share against U.S. shale producers amid a global glut in supplies.
“With the current low oil price and a consensus not to cut production, major oil producers have no choice but to increase overseas supplies to secure revenue,” Gao Jian, an analyst at SCI International, a Shandong-based consultant, said by phone today. “With Russia introducing tax cuts for exports, supplies are forecast to rise more next year.”
Russia’s lower house of parliament last month passed a bill to reduce oil-export duties and boost extraction taxes, removing about 300 billion rubles ($5.28 billion) from its federal budget next year. The economy must adapt to the reality of prices that could drop to as low as $40 a barrel, Putin said in his annual press conference in Moscow on Dec. 18.
The ruble rallied today as the Chinese Foreign Minister Wang Yi signaled on Dec. 20 the country will provide help to Russia if needed and is confident it can overcome its economic difficulties. Chinese Commerce Minister Gao Hucheng said expanding a currency swap between China and Russia and making increased use of yuan for bilateral trade would have the greatest impact in aiding Russia, according to Hong Kong-based Phoenix TV.
China’s crude imports from Saudi Arabia, OPEC’s biggest producer, shrank for a second month, according to the customs data today. Shipments declined to 3.99 million tons, down 5.9 percent from a year ago. The supplies cost $88.40 a barrel, the lowest average price since June 2010, data complied by Bloomberg show.
— With assistance by Sarah Chen