The largest state-held Chinese refiners are not rushing to purchase heavily discounted Russian crude on the spot market, avoiding being singled out as buyers of Moscow’s oil amid tightening Western sanctions on Russia, Reuters reported exclusively on Wednesday, citing six sources familiar with the issue.
China, which has grown increasingly closer ties with Russia in the energy sector of late, has not officially condemned Vladimir Putin’s war in Ukraine, but its government has recently appeared cautious about new spot deals.
“SOEs [state oil enterprises] are cautious as their actions could be seen as representing the Chinese government and none of them wants to be singled out as a buyer of Russian oil,” one of the sources told Reuters.
If Chinese state refiners continue to steer clear of spot deals with Russian crude, Moscow will be struggling to sell in China the barrels unwanted by Western buyers.
According to Reuters’ sources, all the largest state-controlled firms, including Sinopec—the biggest refiner in Asia, PetroChina, CNOOC, and Sinochem, have not purchased Russian crude on the spot market for loadings in May, despite the record discounts at which Moscow’s oil is being offered to buyers compared to Dated Brent. Related: Does China’s Friendship With Russia Really Have ‘No Limits’?
For some of the biggest firms in China, risk management and compliance should come before profits, a source briefed on recent management meetings about trading with Russian oil told Reuters.
Some independent Chinese refiners, however, are said to continue buying spot Russian oil, although they are not bragging about it and are keeping details of the deals, including payment methods and currencies of transactions, “under wraps,” one of Reuters’ sources said.
In an estimate earlier this week, Wood Mackenzie said that developed economies, allies of the U.S., and the EU are expected to replace around 650,000 barrels per day (bpd) of Russian crude oil with grades from other producers amid self-sanctioning. Yet, the biggest developing Asian oil importers haven’t raced yet to buy heavily discounted Russian crude because of short-term contractual obligations with Middle Eastern producers. In addition, China hasn’t shown yet too much appetite for Russian crude because of several factors, WoodMac said. These include expensive freight for Russian cargoes due to the sanctions, challenges with payments and tanker insurance, the fact that a Urals voyage takes double the time compared to Middle Eastern grades going to China, and Chinese refiners’ long-term contracts with oil exporters from the Middle East.
By Tsvetana Paraskova for Oilprice.com
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