China’s state-owned oil refining giants are speeding up purchases of Russian crude, citing the allure of cheap cargoes from the OPEC+ producer as demand recovered after Covid Zero was ditched.
China Petroleum & Chemical Corp., or Sinopec, as well as PetroChina Co. and CNOOC Ltd. have started and will continue to ramp up their procurement of Russian grades in the coming months, said people with knowledge of the matter, who asked not to be identified as the information is private. Shipments purchased include flagship Urals, which ships from Russia’s distant western ports, as well as ESPO, which loads from pacific terminals.
Sinopec declined to comment, while PetroChina and CNOOC didn’t immediately respond to Bloomberg News queries.
This marks a significant shift in the attitude of so-called Chinese oil majors toward Moscow, opening the flood gates for Russian crude and fuels to infiltrate more parts of Asia’s no. 1 refining nation. China and India have been the top two buyers of Russian crude since the European Union slapped an initial round of sanctions on Russia over the war in Ukraine. Chinese state-owned refiners have erred on the side of caution since then, while private refiners doubled down on cheap oil from the OPEC+ producer.
Processing Russian crude should improve refining margins at Chinese state-owned refiners, placing them in a competitive position to also export fuels to other buyers in Asia and Europe, said Daphne Ho, senior research analyst for oil and refining at Wood Mackenzie.
Since the sanctions took effect in December, Sinopec’s presence in the Urals and ESPO markets has been patchy at best, said traders who buy and sell crude across Asia. They said the company’s reluctance stemmed from reputational damages, as well as banking and financing complications at that time.
This week, Energy Aspects Ltd. reported that China’s daily oil imports from Russia could increase by as much as 500,000 barrels this year to about 2.2 million barrels.
Tankers current enroute from Russia to China include Crudemed and NS Arctic, according to data from Kpler and Bloomberg ship-tracking data. Both vessels had picked up their cargo from Russia’s Primorsk port, where Urals is typically loaded. The buyer is believed to be PetroChina, according to Kpler, although it’s unclear if the refiner will process the cargo or resell it.