The largest state-owned and private refiners in China are beating the smaller independent processors in the race to procure discounted crude from Russia, leaving the so-called teapots having to increasingly rely on Iran's cheap oil, Reuters reported on Friday, citing vessel-tracking data and trading sources.
Right after the EU and G7 embargo and price cap on Russian crude oil came into effect from December 5, 2022, the state-controlled Chinese refiners were hesitant to buy Russian cargoes, unsure of how the sanctions and price caps would work and how strictly the West would be in enforcing the bans.
The European Union, G7, Australia, and other allies banned from December 5 maritime transportation services from shipping Russia's crude oil to third countries if the oil is bought above the price cap of $60 per barrel. China, however, isn't following the price cap policy - as it hasn't followed the U.S. sanctions on Iran's oil exports - and is taking advantage of discounted Russian crude.
After two months of hesitation, large Chinese refiners, both state-controlled and private, have resumed imports of Russian crude and are now the key crude export outlet for Russia. During the period of hesitation, the smaller independent refiners gobbled up Russia's ESPO grade exported from the Far East Russian ports. But now that the big buyers are back on the market for Russian crude, the teapots are looking at other discounted crudes such as the grades sanctioned Iran and Venezuela are exporting, according to Reuters estimates based on ship-tracking data.
Many private Chinese refiners in the Shandong province are now buying increasing volumes of Iranian crude as competition for Russian oil from China's major state-held refiners and from Indian buyers has made Moscow's barrels relatively more expensive.
China's teapots are estimated to have imported 800,000 barrels per day (bpd) of Iranian crude oil and condensate in March, up by 20% compared to February, Emma Li, an analyst with Vortexa, told Bloomberg earlier this month. Imports from Iran into the Shandong province-home to most of the private refiners in China-could continue to be robust in the coming months, according to the analyst.
By Tsvetana Paraskova for Oilprice.com
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
Comments
In January 2023 Russian exports hit 8.2 million barrels a day (mbd) or 2.5% higher than pre-Ukraine level of 8.0 mbd and again in March 2023 with exports hitting 8.1 mbd.
Moreover, Russian petroleum products exports have been also soaring in the form of increased volumes of Russian crude purchased by China, India, Singapore and Turkey, refined and then sold to the EU and the United States.
Furthermore, Russia neither needs the services of Western shipping to transport its oil exports around the world nor Western insurance. It has access to both.
The price cap is dead and the sanctions and bans are toothless and futile.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert