Chinese State Refiners Cut Russian Oil Imports Amid Sanctions Uncertainty

Some state-controlled Chinese refiners have reduced purchases of Russian oil loadings for March as they assess the risks of dealing with sanctioned entities and wait for more clarity about a possible Russia-Ukraine ceasefire and potential U.S. sanctions relief on Russia’s oil trade.

State-owned refining giant China Petroleum and Chemical Corporation, or Sinopec, as well as Zhenhua Oil, have suspended purchases of Russian crude oil loading this month, amid concerns over secondary sanctions, trade sources with knowledge of the plans told Reuters on Friday.

Oil giants PetroChina and CNOOC continue to buy Russian oil for March loadings, but at reduced rates, according to some of the Reuters sources.

While state oil firms in China either halt or reduce Russian oil volumes, at least for now, the independent refiners in China, which prefer to buy cheaper Russian and Iranian oil, are picking up the slack.

Chinese oil majors have adopted a more cautious approach toward Russian grades following the U.S. sanctions, Emma Li, senior market analyst at Vortexa, wrote in an analysis this week.

“Even when transported via non-sanctioned tankers, their ESPO Blend purchases were limited. Market sources indicate that some state-owned companies have completely halted Russian crude purchases in March after scaling back in February,” Li added.

Chinese state majors refraining from Russian oil has dampened demand not only for ESPO, but also for other Russian crude grades, including Urals and Arctic crude, according to the analyst.

The independent refiners, for their part, boosted purchases of Russia’s Far East flagship ESPO Blend and more February-loading cargoes were delivered to the Shandong and Jiangsu provinces, primarily to teapot refiners, Vortexa has estimated. In January, the independent refiners preferred to reduce runs rather than seek alternative barrels amid uncertainties surrounding ESPO supply, Li noted.

A massive reshuffle of tankers allows non-sanctioned vessels to pick up trade with Russian and Iranian oil, which will result in a rebound in China’s imports of cheaper crude from the two producers in March, from a two-year low in February, analysts and traders have told Reuters.

Source: Oilprice.com