MOSCOW (MRC) -- China's state refiners are honoring existing Russian oil contracts but avoiding new ones despite steep discounts, heeding Beijing's call for caution as western sanctions mount against Russia over its invasion of Ukraine, reported Reuters.
State-run Sinopec, Asia's largest refiner, CNOOC, PetroChina and Sinochem have stayed on the sidelines in trading fresh Russian cargoes for May loadings, according to sources. Chinese state-owned firms do not wish to be seen as openly supporting Moscow by buying extra volumes of oil, after Washington banned Russian oil last month and the European Union slapped sanctions on top Russian exporter Rosneft and Gazprom Neft.
China and Russia have developed increasingly close ties in recent years, and as recently as February announced a "no limits" partnership, and China has refused to condemn Russia's action in Ukraine or call it an invasion.
China has repeatedly criticized western sanctions against Russia, although a senior diplomat said on Saturday that Beijing is not deliberately circumventing sanctions on Russia. China, the world's largest oil importer, is the top buyer of Russian crude at 1.6 MMbpd, half of which is supplied via pipelines under government-to-government contracts.
Sources expect China's state firms to honor its long-term and existing contracts for Russian oil but steer clear of new spot deals.
A drop in China's imports of Russian oil could prompt its giant state refiners to turn to alternative sources, adding to global supply concerns that had driven benchmark Brent oil prices to 14-yr highs near USD140/bbl in early March after Russia invaded Ukraine on Feb. 24.
Brent futures have since eased to below USD110 after the US and allies announced plans to release stocks from strategic reserves.
Risk control and compliance first. Before the Ukraine crisis, Russia supplied 15% of China's oil imports: half of that via the East Siberian and Atasu-Alashankou pipelines and the rest by tankers from its Black Sea, Baltic Sea and Far East ports.
Unipec, the trading arm of Sinopec and a leading Russian oil buyer, has warned its global teams at regular internal meetings in recent weeks against the risks of dealing with Russian oil. According to a source, the message and tone are clear - risk control and compliance comes before profits. Another of the sources with a refinery that regularly processes Russian crude said his plant was told by Unipec to find replacement to maintain normal operations.
Unipec loaded 500,000 metric t (tonnes) of Urals from Russia's Baltic ports in March, the highest volume in months, supplied by Surgutneftegaz on spot and under a Rosneft export tender that Unipec won for loadings between September 2021 and March 2022, according to traders and shipping data.
Other state buyers - PetroChina, CNOOC and Sinochem - have shunned Russia's ESPO blend for May loading, sources said. Sinopec is facing payment problems even for deals agreed earlier as risk-averse state banks look to scale down financing Russian oil-related deals, the second source said.
As MRC wrote previiously, amidst the ongoing conflict between Russia and Ukraine in Eastern Europe, key industry players are releasing announcements regarding their stand on this topic. From taking firm actions such as retracting services to provide humanitarian resources, there is a lot happening around the globe. In this curated piece, get a clear understanding on plastic additives industry’s take and the measures they are adopting that will alter the market trends and developments moving forward.