(Bloomberg) -- The price of Russian crude and fuel is rising for buyers in Asia as a pool of bigger customers from China and India expands, putting pressure on smaller refiners that have eagerly consumed the cheap oil.

Offer levels for Russia’s Urals and ESPO crude, as well as fuel oil, surged over the past weeks, according to traders with knowledge of the matter. Increased interest from Chinese state-owned and large private refiners such as Sinopec, PetroChina Co. and Hengli Petrochemical Co., in addition to a jump in Indian demand, led cargoes to be snapped up at higher prices, they said.

The larger refiners have muscled in to a patch typically dominated by China’s smaller independent processors, known as teapots, which have been consistent consumers of discounted Russian crude. ESPO oil from the nation’s Far East has been a particular favorite due to its short shipping distance.

Offers for ESPO that’s typically loaded at Kozmino port was close to $6.50 to $7 a barrel below ICE Brent on a delivered basis to China, while flagship Urals shipped from western ports was around $10 under the same benchmark, said traders. That’s an increase of as much as $2 from last month, marking one of the steepest jumps since sanctions were imposed on Dec. 5, they added. 

China and India have become key outlets for Russian crude after most others shunned its energy due to the war in Ukraine. The pool of buyers willing to import cheap oil from the OPEC+ producer has grown as more players set aside concerns over Western sanctions that had kept them on the sidelines.

More importers are comfortable with methods to reduce their risk exposure by asking sellers to handle shipping and insurance, on top of using non-western banks and making payments in yuan, rupees, dirhams or rubles. This approach has given buyers more confidence to maintain and even increase flows without too much worry about their compliance to the $60-a-barrel price cap that exempts shipments from European sanctions, traders said.

It’s unclear if imports by India and China currently meet the terms of the cap as most cargoes are sold on a delivered basis with opacity around shipping and insurance costs. However, the US says India is complying.

Offers for Russian M-100 fuel oil, a grade that can be used in place of crude to make gasoline and diesel, went as high as $160 to $180 a ton over the Platts’ pricing benchmark, up from last month when its premium hovered around $130 a ton, according to traders.

The four-week average shipments to Russia’s Asian customers, plus those on vessels showing no final destination edged higher in the period to March 3, rising to 3.1 million barrels a day. That’s their highest since Bloomberg began tracking the flows at the start of 2022.

Russia is expected to maintain crude production longer than many expected, according to S&P Global Vice Chairman Dan Yergin. There’s going to be a slow decline in its output but not the “dramatic fall off a cliff that some people projected a year ago,” he told Bloomberg TV on Wednesday. 

--With assistance from Elizabeth Low.

(Updates with detail on Russia’s projected output in final paragraph.)

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