Chinese Refiners Cut Russian Oil Purchases Amid Sanctions

Chinese refiners are significantly reducing their purchases of Russian oil following the latest round of U.S. sanctions targeting Russia’s oil industry. According to Bloomberg, state-owned companies such as Sinopec and PetroChina have canceled orders for Russian crude, while independent refiners, often referred to as “teapots,” are also refraining from buying Russian oil to avoid potential penalties for violating these sanctions.

Reports from Rystad Energy indicate that approximately 45% of China’s imports of Russian crude, equating to around 400,000 barrels daily, have been impacted by these changes. This forced adjustment in purchasing behavior has led to Russian crude trading at a deeper discount, with the price of flagship Urals crude noted at $57.99 per barrel at the end of last week.

Impact on Oil Prices and Supply Chains

China primarily imports the Eastern Siberian-Pacific Ocean (ESPO) blend, and the recent cancellations have contributed to a decline in its price. Over the past three years, Russia has emerged as the largest single oil supplier to both China and India, largely due to the attractive discounts on its oil resulting from ongoing Western sanctions. With the recent developments, both nations are now compelled to seek alternatives to Russian crude, which typically comes at higher prices.

China has proactively built a supply cushion by importing more crude oil than it currently consumes. The country is also working to increase its storage capacity, with plans to establish 11 new storage sites capable of holding a combined 169 million barrels by the end of 2026.

Conversely, India faces a more complex challenge in replacing its Russian oil supply. Currently, Russia accounts for about one-third of India’s total oil imports, a critical resource that comprises approximately 85% of the country’s consumption. Due to this heavy reliance on imported crude, India is particularly sensitive to price changes and is motivated by discounts when making purchasing decisions.

Even Indian refiners are reportedly beginning to turn away from Russian oil to mitigate the risk of U.S. sanctions. The shifting dynamics in the global oil market highlight the significant pressure that both China and India are under as they navigate the implications of these sanctions while attempting to secure stable energy supplies.

As the situation continues to evolve, the long-term effects on both nations’ energy strategies will likely become clearer, particularly in relation to how they manage their dependencies on Russian crude amid fluctuating global oil prices.