India's withdrawal triggers a chain reaction, leading to a price war between Russia and Iran in China.

Notice that, following a decrease in purchases from India, Russian and Iraqi oil producers are increasing discounts in order to compete for the limited group of Chinese buyers. According to a forecast by Rystad Energy, the amount of oil imported from Russia to India may decrease by 40% from January levels, to about 600,000 barrels per day. The excess supply is currently shifting towards the East, sparking a price war between suppliers from Iran, who have long been favored by Chinese private refineries. Traders familiar with these transactions have revealed that the current price of Russian Urals crude is about $12 lower per barrel than the ICE Brent benchmark, compared to a $10 discount last month. They also stated that the discount for Iranian Light crude has widened from $8-9 in December to $11 below the global benchmark price per barrel. Independent Chinese refineries historically have acted as a "pressure valve" in the oil market, absorbing barrels that other buyers avoided. However, considering that they only make up about one-fourth of China's processing capacity and are subject to government-set import quotas, their capacity is limited. Increase in Russian oil imports to China As China is unable to fully absorb the excess oil, unsold petroleum is piling up in Asian waters, leaving Russia and Iran with few options. The Russian government has been forced to cut production, while Iran is trying to export as much oil as possible in preparation for potential attacks by the United States. Analyst Jianan Sun from Energy Aspects stated, "Chinese private refineries cannot take in more oil as their capacity may have reached its limit," pointing out that sanctioned barrels are accumulating in onshore and offshore storage facilities. Currently, with Russia forcefully entering the market, Iran appears to be suffering. Ship tracking data shows that in the first 18 days of February, daily Russian oil arrivals at Chinese ports increased to 2.09 million barrels, up by about 20% from January and about half from December. In contrast, according to data from Kpler, Iran's oil exports to China in 2021 have been around 1.2 million barrels per day, a decrease of about 12% compared to the same period last year. The data intelligence company estimates that there are currently almost 48 million barrels of Iranian oil offshore, up from about 33 million barrels in early February, mostly in the Yellow Sea and the Singapore Strait. At the same time, around 9.5 million barrels of Russian oil are remaining in Asian waters. In the event of oil facilities becoming targets or disruptions in transportation through the Hormuz Strait, a large-scale US attack on Iran could impact the country's continued export capacity. The US has deployed a significant number of troops in the Middle East, and although President Trump has expressed a preference for reaching a diplomatic agreement, he has also warned that failure to do so would be "very bad" for Iran. Lin Ye, Vice President of the oil market at consulting firm Rystad Energy, stated that due to optimism regarding a ceasefire agreement in Ukraine, the "risk level for Russian oil is relatively low" for Chinese buyers.