Why Russia Is Slashing Oil Prices for China

Edward Lawson

Energy

Political

Data Interpretation

Russia-Ukraine Conflict

Commodity

Economic

Summary:

Russia offers China unprecedented oil discounts as India exits, testing China's absorption limits amid shifting energy flows.

Russian oil exporters are offering crude to China at record-breaking discounts as they scramble to secure demand from the world's top importer. The price cuts come as sellers anticipate losing India, another major customer, leaving China as the primary destination for their discounted barrels.

This strategic pivot follows the announcement of a trade agreement between U.S. President Donald Trump and Indian Prime Minister Narendra Modi, which reportedly includes a halt to India's Russian oil purchases. While details remain scarce, the potential shift has sent ripples through the energy market, forcing Russian suppliers to sweeten their deals for Chinese buyers.

With Western sanctions already pressuring demand from India, a formal halt in purchases would amplify Russia's reliance on China and increase the volume of its oil held in floating storage.

The Geopolitical Squeeze on Russian Oil

Analysts at JPMorgan, led by Natasha Kaneva, project that even with a new trade deal, India will likely maintain Russian crude imports at a level of 800,000 to 1 million barrels per day (bpd). This represents 17-21% of its total crude imports but is a significant drop from the peak of around 2 million bpd in June of last year.

In a February 4 note, the analysts wrote, "China, especially Shandong's independent refiners, are the main beneficiaries of this trend — absorbing most displaced Russian barrels and boosting margins, runs, and strategic stockpiles thanks to deep discounts and supportive domestic policy."

How Deep Are the Discounts?

The price incentives for Chinese refiners have grown substantially, making Russian crude exceptionally competitive. According to trade sources, the discounts have widened significantly in recent weeks:

• ESPO Blend: Crude delivered from the Pacific port of Kozmino now sells at a discount of nearly $9 a barrel to ICE Brent, up from $7–$8 in previous months.

• Urals Grade: This grade, typically exported from the Baltics to India, is being offered at a discount of about $12 per barrel, with traders suggesting prices could fall even further.

"Chinese buyers have been benefiting from multi-year low discounts on Russian crude in recent months, to the extent that some have even reduced Iranian intake in order to absorb more Russian barrels," said Vortexa analyst Emma Li. "Given that India's pullback is likely to trigger even deeper discounts, this behaviour is likely to continue in the near term."

The primary buyers of this sanctioned oil are China's independent refiners, often called "teapots." In January, Russian oil volumes flowing into Shandong province, a major teapot hub, reached record highs. Meanwhile, China's state-owned refiners have avoided seaborne Russian crude since October after the U.S. sanctioned major producers Rosneft and Lukoil.

Limits to China's Crude Appetite

Despite the aggressive discounts, traders and analysts believe China's capacity to absorb Russian oil may be reaching its limit, especially as long as state refiners remain on the sidelines.

Data from analytics firm Kpler shows China's seaborne imports of Russian crude hit a record 1.7 million bpd in January. During the same period, India's imports fell to 1.1 million bpd, its lowest level since November 2022. OilX reported a similar figure for China's January imports at 1.64 million bpd, the highest since March 2024.

Figure 1: China's seaborne imports of Russian crude surged to record levels in January as India's intake declined, highlighting a potential shift in global energy flows.

However, analysts caution that China's independent refineries simply do not have enough capacity to take on all the excess Russian supply.

"Amid rising onshore inventory, we expect Russian seaborne flows to China to decrease from March, following elevated levels of Jan-Feb 2026," said Sun Jianan, a senior analyst with Energy Aspects.

Vortexa's Li added, "Without re-engagement from the state-owned majors, Russia is still facing an oversupplied market despite strong teapot absorption."

Still, some potential for increased demand exists. CNPC is reportedly planning to restart a unit at its refinery in the northeastern city of Dalian around mid-year, a move that could capitalize on the high margins offered by discounted Russian crude.

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Warren Takunda

Economic

Pound-euro falls back from 4-month highs at 1.16, reaching 1.1515 in Thursday trade.

The pair is the best barometer we have for UK-specific risks, confirming suspicions that traders are nervous about renewed political concerns in the UK, where the Prime Minister Keir Starmer is back under pressure.

"We may be reading a little too much into sterling price action, but it did seem to sell off yesterday afternoon after PM Keir Starmer faced a confrontation from his own Labour MPs in the House ofCommons," says Chris Turner, lead FX analyst at ING Bank.

Starmer is facing renewed pressure from Labour Party peers over what he knew about Peter Mandelson when he appointed him to the position of U.S. Ambassador. Mandelson had close ties to convicted paedophile and financier Jeffrey Epstein.

An extraordinary session in parliament on Wednesday afternoon and evening saw Starmer concede he knew of controversial details.

GBP steadily fell through this session, with follow-through selling seen on Thursday. Pound-Euro Fall Confirms Market is Nervous Over Starmer_1

Above: GBP/EUR started falling during Tuesday's afternoon parliamentary session that started with Prime Minister's Questions.

"The prospect of a change in both prime minister and chancellor remains one of the key threats to sterling this year," says Turner.

Angela Rayner, now the leading contender to replace Starmer, forced the Prime Minister into another u-turn by forcing him to release documents relating to Mandelson's appointment.

"Some would argue that Angela Rayner effectively kicked off her leadership bid by calling for greater scrutiny of the vetting process used for last year’s appointment of Peter Mandelson as UK ambassador to the US," says Turner.

Polymarket shows 65% odds Starmer is replaced by year-end.

Markets fear Starmer will need to appease left wing of his party, resulting in a looser commitment to UK fiscal rules while his replacement in the event of an internal party coup will be even more lax on UK spending and debt.

"A replacement of the PM by Rayner would mark a clear shift to the left and add further doubts to the UK fiscal position," explains Turner.

UK bond market movements add to evidence that investors are tetchy over the evolving situation.

"It's worth keeping a closer eye on the UK with PM Starmer under considerable domestic pressure given the handling of the Peter Mandelson story. 10yr Gilts were up +2.9bps yesterday bucking the international trend as concerns grew that he could be replaced. So one to watch," says Jim Reid, strategist at Deutsche Bank.

However, it will be difficult to displace the Prime Minister as an MP wishing to challenge Starmer for the leadership must be supported by 20% of Labour MPs (80 or 81 out of 404 total MPs at present).

If this threshold is reached, a leadership election is triggered, with the incumbent leader automatically on the ballot paper.

There's a strong likelihood that nervousness recedes as traders are reminded there's an incredibly high bar to replacing Starmer, which suggests GBP/EUR weakness might be limited.

Source: Poundsterlinglive

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Gerik

Economic

Bond Markets React To Political Instability

UK government bond yields moved higher on Thursday as political tensions resurfaced at the heart of Westminster. The yield on the benchmark 10-year gilt rose by 3 basis points to around 4.575% in morning London trading, a modest move in absolute terms but one that reflects heightened sensitivity to political risk. The increase suggests investors are demanding slightly higher compensation to hold UK debt as uncertainty builds around the prime minister’s position and the broader policy outlook.

This market reaction appears closely correlated with political developments rather than macroeconomic data, reinforcing how leadership credibility can influence borrowing costs even in the absence of new fiscal announcements.

The Mandelson Affair And Leadership Credibility

Pressure on Prime Minister Keir Starmer intensified following renewed scrutiny of his handling of former UK ambassador to the United States Peter Mandelson and Mandelson’s links to the disgraced financier Jeffrey Epstein. Recently released documents and emails by the U.S. Department of Justice shed further light on the depth of Mandelson’s relationship with Epstein, which reportedly continued even after Epstein’s 2008 conviction.

Starmer told Parliament that he had been misled during the vetting process, stating that Mandelson had repeatedly downplayed the nature of his relationship with Epstein. The prime minister said that had he known the full extent of those ties, Mandelson would never have been appointed. While Mandelson has since resigned his Labour Party membership and was removed as ambassador last September, the episode has raised questions about judgment and oversight at the highest level of government.

The connection between the scandal and market sentiment is causal in nature. Concerns over leadership integrity can translate into doubts about policy stability, which in turn affect investor confidence in sovereign debt.

Political Fallout Inside The Labour Party

The controversy comes on top of earlier challenges facing Starmer, including policy reversals, weak economic momentum, and declining opinion poll support. According to Eurasia Group, the probability of a leadership challenge within the Labour Party this year has risen sharply to 80%, up from 65% previously.

Mujtaba Rahman of Eurasia Group described the appointment of Mandelson as ambassador as a catastrophic misstep that has triggered the most serious crisis of Starmer’s premiership. While some Labour lawmakers had planned to delay any leadership move until after key local and regional elections later this year, Rahman noted that the pace of events has made Starmer’s position increasingly precarious.

A total of 81 Labour members of parliament would be required to formally trigger a leadership contest. Although Starmer has publicly stated that he will fight any challenge, political analysts suggest the accumulating pressure could ultimately force his hand if opposition within the party consolidates.

Market Implications Beyond The Headlines

While the rise in gilt yields remains contained for now, it underscores how political risk can intersect with financial markets at a sensitive time for the UK economy. With growth already weak and public finances under strain, any perception of prolonged political instability could weigh further on investor sentiment.

For now, the move in borrowing costs reflects caution rather than panic. However, if the leadership crisis deepens or translates into policy paralysis, markets may begin to price in a higher and more persistent political risk premium for UK assets.

Source: CNBC

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Winkelmann

Cryptocurrency

Tether's dollar-pegged stablecoin USDt expanded to a record $187.3 billion market capitalization in the fourth quarter of 2025, even as the broader crypto market slid following October's liquidation cascade.

According to its latest quarterly report, the USDt (USDT) market cap grew by $12.4 billion in Q4.

Data shows that USDt has been widening its dominance while competitors retreated.

After the major liquidation event on Oct. 10, the market cap of Circle's USDC (USDC), the second-largest stablecoin, fluctuated throughout the rest of Q4 but closed the period largely unchanged. Ethena's synthetic dollar USDe, ranked third among stablecoins at CoinMarketCap, dropped by 57%.

USDt market cap. Source: Tether

USDt onchain activity hits records

Onchain activity also reached new highs. The average number of monthly active USDt wallets climbed to 24.8 million, representing almost 70% of all stablecoin-holding wallets. Quarterly transfer volume surged to $4.4 trillion, while the number of onchain transfers rose to 2.2 billion.

Furthermore, Tether reported total reserves of $192.9 billion at the end of Q4, up $11.7 billion from the previous quarter, leaving net equity of $6.3 billion. Its exposure to US Treasuries increased to $141.6 billion, placing it among the biggest holders globally and ahead of several sovereign nations.

Tether buys more US Treasuries. Source: Tether

The data also points to a relatively stable user base. About two-thirds of USDt supply is held in savings wallets and centralized exchanges, while the remaining third supports activities tied to payments, remittances and decentralized finance.

USDt is also the most commonly used stablecoin in illicit transfers. Bitrace reported that $649 billion in stablecoins, or about 5.14% of total stablecoin transaction volume, flowed through high-risk blockchain addresses in 2024, with Tron-based USDt accounting for more than 70% of the activity.

Tether has stepped up efforts to curb illicit use, launching collaborative programs with TRM Labs and Tron to monitor and freeze illicit funds.

Tether launches GENIUS Act–compliant stablecoin

In January, Tether launched USAt, a dollar-pegged stablecoin built specifically for the US market. Issued by Anchorage Digital Bank, USAt is a stablecoin compliant with the US GENIUS Act, with $10 million initial supply on Ethereum.

On Monday, Tether and Opera partnered to broaden access to digital payments in emerging markets by integrating USDt and Tether Gold (XAUT) into Opera's MiniPay wallet.

Source: COINTELEGRAPH

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Gerik

Economic

Cryptocurrency

Policy Clarity Removes A Key Assumption

Bitcoin sold off sharply after U.S. Treasury Secretary Scott Bessent told lawmakers that the federal government lacks the authority to buy Bitcoin or compel banks to support the crypto market. Speaking before the House Financial Services Committee, Bessent stated that neither the Treasury nor the Financial Stability Oversight Council has the mandate to backstop digital assets. That clarification removed a lingering assumption among some investors that authorities might step in during periods of acute stress, triggering a renewed wave of selling.

The immediate market reaction pushed Bitcoin below $71,000, extending losses from earlier in the session. While prices later stabilized after approaching the psychologically important $70,000 level, the damage to sentiment was already evident.

From Speculation To Systemic Anxiety

The policy signal landed amid already fragile conditions. Bitcoin is down about 18% year to date and has recorded its fourth consecutive monthly decline after a sharp drop last weekend. The latest leg lower reflects more than a technical move. It underscores a shift in perception about crypto’s role during market stress. Without the prospect of official support, Bitcoin increasingly trades like a high-risk speculative asset rather than a hedge.

Notable investor Michael Burry amplified those fears, warning that a sustained decline could trigger a “death spiral” of forced selling and value destruction. He argued that Bitcoin has failed to behave like a debasement hedge comparable to gold, instead revealing itself as an asset driven primarily by speculation.

Broader Markets Add Downside Pressure

The crypto slump has unfolded alongside broad-based selling across global markets. Risk assets weakened as investors reassessed rate sensitivity and liquidity conditions, with technology shares and other growth assets under pressure. The crypto market, already sliding for months due to whale selling and forced liquidations, proved especially vulnerable once cross-asset stress intensified.

Additional uncertainty has come from monetary policy expectations. President Donald Trump’s decision to nominate Kevin Warsh as the next Federal Reserve chair has been interpreted by markets as a potentially more hawkish shift, reinforcing concerns about tighter financial conditions for speculative assets.

Flows And Positioning Show Capitulation, Not Accumulation

Market data suggests investors remain focused on reducing exposure rather than positioning for a rebound. Analysts at 10X Research noted that after Bitcoin broke below the $73,000 support level, sentiment shifted meaningfully and flows indicate that buyers are not yet stepping in. Deleveraging and position unwinding continue to dominate, a pattern consistent with late-stage corrections rather than early recovery phases.

Ether and other major tokens have followed Bitcoin lower, reflecting a strong correlation across the digital asset complex rather than isolated weakness. The broader crypto market remains under pressure as confidence erodes and liquidity thins.

Technical Levels Offer Little Comfort For Now

Some strategists argue that the mid-$70,000 region could still act as a reference zone, given its role as a prior high in March 2024 and a low during the tariff-driven sell-off in April 2025. However, even proponents of selective dip-buying caution that downside risks persist. With positioning risk still elevated in traditional markets, spillovers into crypto remain likely.

Bitcoin’s latest slide illustrates a deeper issue than price volatility. The Treasury’s message has clarified that digital assets stand outside the traditional financial safety net, leaving the market to absorb shocks on its own. Until confidence stabilizes and a credible catalyst emerges, Bitcoin’s trajectory appears tied to broader risk sentiment and the ongoing unwinding of speculative excess rather than any imminent policy relief.

Source: Yahoo Finance

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Samantha Luan

Political

Economic

The latest revision of UN World Population Prospects reveals that demographic shift is no longer a distant projection but an accelerating reality across parts of Asia, with the share of people aged 65 and over rising fast in several countries.

As Statista's Tristan Gaudiaut reports, this trend poses a significant challenge in the region for labor markets, public finances and care systems within a single generation.

The figures (UN medium-scenario projections) show Japan already far ahead, as older adults made up already around 29 percent of the population in 2020, and are projected to surpass 30 percent in the coming years: 31.1 percent by 2030 and 35.4 percent by 2040. But, as our infographic shows, the more striking story is the pace of change elsewhere.

You will find more infographics at Statista

South Korea and China are among the standout accelerators.

Both countries are expected to see their 65+ population shares more than double between 2020 and 2040. In South Korea, this figure is projected to surge from 15.8 percent (2020) to 33.8 percent (2040), while in China, it is expected to rise from 12.7 percent to 26.6 percent.

Those trajectories mirror intensifying national concerns about future labor supply and pension burdens, amid persistent low fertility and a shrinking workforce.

Meanwhile, rapid ageing is not confined to the region's richest economies. Thailand and Vietnam start from lower baselines, yet both trend sharply upward by 2040.

Both South-East Asian countries are projected to see their 65+ population shares double in twenty-years: Thailand to 25.6 percent and Vietnam to 15.8 percent.

Source: Zero Hedge

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George Anderson

Daily News

Remarks of Officials

Economic

Political

Canada’s government is set to scrap its planned 2035 ban on new internal combustion engine cars, shifting its strategy toward promoting electric vehicles through new incentives and stricter fuel standards.

According to reports citing government and auto industry sources, the Mark Carney administration will officially announce a new automotive strategy that pivots away from a hard deadline for phasing out gasoline-powered vehicles.

A New Strategy: Subsidies and Tighter Standards

The new plan replaces the 2035 ban with a combination of consumer incentives and industry regulations. Key components of the new policy are expected to include:

• Tax Relief for EV Buyers: A subsidy of C$5,000 (approximately $3,660) per electric vehicle to encourage adoption.

• Infrastructure Investment: A C$1.5 billion fund dedicated to building out Canada's EV charging infrastructure.

• Stricter Fuel Efficiency Rules: New, potentially tighter fuel efficiency standards will be implemented for all new vehicles.

This approach signals that the government remains committed to transport electrification but is changing the method to achieve its goal.

Responding to Auto Industry Pressure

The policy shift is seen as a major concession to Canada's automotive industry, which strongly opposed the previous EV mandates. The original targets required EVs to account for 20% of sales in the near term, rising to 60% by 2030 and a full 100% by 2035.

Automakers argued these goals were unrealistic and impossible to achieve within the proposed timeline. They also raised concerns that a forced transition to EVs would be expensive for consumers and limit their vehicle choices.

Protecting Canadian Auto Jobs from US Tariffs

Another critical driver behind the new strategy is a move to protect the domestic auto sector from U.S. trade policy. The government plans to prioritize support for companies that manufacture cars in Canada, aiming to safeguard thousands of jobs.

This measure is a direct response to tariffs imposed by U.S. President Trump last year on foreign-made automobiles, creating pressure on Canada's export-oriented auto industry.

A Mandate in Disguise?

While the direct ban is being removed, it remains uncertain if the auto industry will fully embrace the new terms. The use of stringent fuel efficiency standards has been employed elsewhere as an indirect way to mandate EV sales.

California offers a prominent example. The state has implemented such demanding emissions rules for light vehicles that it is difficult for most carmakers to comply without selling a significant number of zero-emission vehicles. This raises the question of whether Canada's new policy will achieve a similar outcome, effectively pushing the market toward EVs without an explicit ban.

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