China’s oil sourcing strategy is in flux as new Western sanctions disrupt its massive trade with Russia. Both state-owned and private refiners are shunning Russian crude, forcing the world’s biggest importer to re-evaluate its options.
The caution is being driven by new penalties. US sanctions on Rosneft and Lukoil have made state giants like Sinopec and PetroChina wary. Meanwhile, the UK/EU blacklisting of a Chinese refiner, Yulong Petrochemical, has terrified the “teapot” sector.
This fear has resulted in a “buyers’ strike,” which has, in turn, caused prices for Russian ESPO crude to plunge. The volume of affected trade is estimated by Rystad Energy AS at 400,000 barrels a day, or nearly half of China’s imports from Russia.
Russia’s position as China’s top supplier, built on discounted oil, is now in jeopardy. The US and its allies are escalating their campaign to cut off Moscow’s oil revenues, a key source of funding for its war in Ukraine.
As China looks for alternatives, other suppliers like the US stand to gain. A recent trade truce between leaders Trump and Xi could smooth the path for more US crude. However, the summit was silent on Russian oil, and a separate shortage of import quotas for teapots is adding to the market’s confusion.
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