China, the world’s largest crude importer, is actively shunning Russian oil, creating a significant supply gap that other producers will be eager to fill. The retreat, led by state-owned Sinopec and PetroChina, is a direct result of new US sanctions on Russian energy giants Rosneft and Lukoil.
The fear of sanctions is widespread. Private “teapot” refiners are also canceling orders, terrified by the recent UK/EU blacklisting of Shandong Yulong Petrochemical Co. This collective pullback has cratered the price of Russian ESPO crude and taken an estimated 400,000 barrels a day off the market, according to Rystad Energy.
This volume, representing up to 45% of China’s Russian imports, is a major victory for the US and its allies. They are intentionally ratcheting up pressure to cut off Moscow’s oil revenues, which are vital for its war effort. Russia had previously cultivated China as its top customer by offering deep discounts.
The key question now is who benefits. One potential winner is the US. A landmark trade truce was just agreed upon last week between leaders Donald Trump and Xi Jinping. While the public readouts focused on semiconductors and soybeans, the new chill between Beijing and Moscow over oil could open the door for more US crude exports.
The situation is not entirely clear-cut. The blacklisted Yulong is now buying more Russian oil out of desperation. Furthermore, many teapots are facing a shortage of import quotas, which will curb their purchasing power for the remainder of the year, regardless of the crude’s origin.
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