Russia’s ESPO crude, once a favored import for China, is becoming “untouchable” for the country’s refining giants, causing its price to plunge. State-owned firms Sinopec and PetroChina Co. are actively canceling cargoes, demonstrating a new wariness of Russian oil.
This shift is driven by a new round of Western sanctions. The US targeted Russian producers Rosneft and Lukoil, while the UK and EU blacklisted a Chinese customer, Shandong Yulong Petrochemical Co. This move against a buyer has sent a powerful message to the entire market.
China’s private “teapot” refiners have received that message loud and clear. They are also shunning Russian oil, fearful of attracting similar penalties. Rystad Energy AS estimates this “buyers’ strike” is impacting 400,000 barrels a day, or up to 45% of China’s Russian imports.
This is a severe blow to Russia, which had leaned on China as its primary customer after the Ukraine invasion, offering deep discounts to secure the market. The US and its allies are now escalating their financial war, aiming to cut off Moscow’s oil revenues.
As China, the world’s biggest crude importer, steps back, other suppliers like the US could fill the void. This follows a recent trade truce between leaders Trump and Xi. However, the situation is complex, as the blacklisted Yulong is now increasing its Russian purchases out of necessity, while other teapots are low on import quotas.