In a sudden reversal, Chinese refiners are treating Russian crude as “too risky,” despite Russia being their top supplier. This shift is driven by new Western sanctions that have both state-owned giants and private “teapots” fleeing the market.
Sinopec and PetroChina Co. are on the sidelines, canceling cargoes. Their fear is linked to US sanctions on Russian firms Rosneft and Lukoil. Meanwhile, the blacklisting of a Chinese refiner, Yulong Petrochemical, by the UK and EU has sent a shockwave through the private sector.
This “buyers’ strike” has had a direct effect on prices, with Russian ESPO crude plunging. The scale is significant, with Rystad Energy AS estimating a 400,000 barrel-per-day disruption. This accounts for up to 45% of China’s Russian oil imports.
Russia’s top-supplier status was built on steep discounts offered after its invasion of Ukraine. The US and its allies are now undermining that strategy by escalating sanctions, aiming to cut off Moscow’s oil revenues.
This shift will force China, the world’s biggest importer, to seek new suppliers. The US, following a trade truce between leaders Trump and Xi, is a potential candidate. However, the situation is complicated by a separate shortage of import quotas for teapots, adding another layer of uncertainty.