China seeks to offset reduced supplies from the Middle East with Russian oil - Reuters
Kyiv • UNN
China's Sinopec has increased its purchases of Russian ESPO crude oil to offset reduced supplies from the Middle East due to the war against Iran. The company purchased 30–40 cargoes of oil for delivery from July through September.
China's state-owned corporation Sinopec, one of the world's largest oil refining companies, has increased its purchases of Russian crude oil from the Far East to compensate for reduced supplies from the Middle East due to the war against Iran, according to multiple sources in trading circles and vessel-tracking data, Reuters reports, writes UNN.
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Sinopec's purchases of Russian crude, which is cheaper than competing grades from regions such as Brazil and West Africa, have helped it maintain relatively stable throughput and ship surplus fuel at a high export margin, despite China's restricting overseas sales of fuel products since March to protect domestic supplies amid trade disruptions related to the war, the publication writes.
According to several sources who spoke on condition of anonymity, Sinopec purchased a total of 30 to 40 cargoes of Russian East Siberia–Pacific Ocean (ESPO) crude for delivery from July through September. This represents 5% to 6% of the refinery's total processing capacity of 5.2 million barrels per day.
A Sinopec representative said the company does not discuss operational matters publicly.
"Sinopec's oil demand appears to have bottomed out after fuel-export restrictions were eased, but the recovery remains selective," said Emma Li, lead China analyst at vessel-tracking firm Vortexa Analytics.
China, the world's largest oil buyer, sharply reduced its overall oil imports after the start of the war with Iran: purchases fell 41% in June compared with the same period last year. However, in July and August, the country eased restrictions on fuel exports.
"Instead of a broad-based increase in imports, demand is shifting toward oil with greater supply security and lower transportation costs—primarily onshore inventories and short-haul supplies from Russia's Far East," Li told Reuters.
According to Li's supply-tracking data, Sinopec purchased about 7.4 million barrels of ESPO in July, most of which was delivered to Rizhao port in the refining hub of Shandong province.
According to Li and four traders who closely monitor the ESPO trade, the company purchased at least 10 cargoes of oil in August and September. ESPO is usually transported on Aframax vessels capable of carrying 740,000 barrels.
China and India have been the largest buyers of Russian oil since the start of the war in Ukraine, but major Chinese state-owned oil refiners, including Sinopec, suspended such purchases in October after Washington imposed sanctions on leading Russian producers "Rosneft" and "Lukoil."
Beijing does not recognize so-called unilateral sanctions, and independent Chinese oil refiners continue to purchase Russian oil.
Sinopec resumed purchases of Russian oil in March and April after a temporary U.S. authorization, Reuters reported, purchasing about 10 cargoes and increasing volumes after the authorization expired, as the war with Iran reduced supplies.
Recent purchases of ESPO crude were not conducted with sanctioned entities as counterparties but through intermediaries, four people familiar with the matter said, providing no further details. Since the start of the war in Ukraine, Sinopec has purchased Russian oil in Chinese yuan.
Before the war with Iran, Sinopec bought nearly half of its oil from the Middle East and was one of Saudi Arabia's largest buyers.
According to trading sources, Sinopec did not purchase Saudi oil in June or July, and bought only 2 million barrels in August. This is significantly less than the 20 million Saudi barrels imported in March and April, and less than one-fifth of the 11 million barrels the company purchased on average each month during the year before the start of the war with Iran.
According to traders, September deliveries of ESPO crude were assessed at a discount of $1–2 per barrel compared with benchmark Brent crude, making them approximately $10 cheaper than competing grades such as Middle Eastern Oman and Brazilian Tupi.