The price of Russia’s key ESPO crude has collapsed as China, its most important customer, shuns its supplies. This retreat is driven by fear of a new, more aggressive round of Western sanctions.
Chinese state-owned giants, Sinopec and PetroChina, are canceling Russian cargoes. This follows US sanctions on Russian producers Rosneft and Lukoil. The risk was further highlighted when the UK and EU blacklisted a Chinese refiner, Shandong Yulong Petrochemical Co.
This move against a Chinese buyer has terrified the “teapot” refiners, the smaller private firms. They are now holding off on purchases, creating a “buyers’ strike” that Rystad Energy AS estimates at 400,000 barrels a day. This volume represents up to 45% of China’s Russian oil imports.
Russia’s post-Ukraine strategy of selling discounted oil to China is now under severe threat. The US and its allies are escalating their campaign to choke off Moscow’s oil revenues, a key source of funding for the war.
As China, the world’s biggest crude importer, looks for new supplies, other nations may benefit. This includes the US, which just agreed a trade truce with Beijing. In a strange twist, the blacklisted Yulong is now buying more Russian oil, as it has no other options.
