China’s oil giants, Sinopec and PetroChina Co., have hit the brakes on Russian imports. The state-owned firms are canceling Russian cargoes, demonstrating a new risk aversion following a new round of US sanctions.
The US blacklisted Russian producers Rosneft and Lukoil, making any dealings with them dangerous. This was compounded by the UK and EU blacklisting a Chinese customer, Shandong Yulong Petrochemical Co. This has panicked the smaller “teapot” refiners, who are also halting purchases.
This widespread “buyers’ strike” has crushed demand for Russian crude, causing prices for the ESPO grade to plunge. Rystad Energy AS estimates that 400,000 barrels a day, or nearly half of China’s Russian imports, are affected.
Russia’s strategy of becoming China’s top supplier through heavy discounts is now faltering. The US and its allies are deliberately targeting this trade to cut off Moscow’s oil revenues and pressure it to end the war in Ukraine.
As China, the world’s biggest crude importer, looks for new supplies, the US could be a beneficiary. A recent trade truce between leaders Trump and Xi has opened the door, although the summit was notably silent on the Russian oil issue.