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Chinese state refiners have sought help from the country’s government to secure the continued flow of Russian crude oil after EU sanctions on the commodity enter into effect next month, according to unnamed sources cited by Bloomberg.
The sanctions—part of an EU embargo on Russian crude—are coordinated with the G7 price cap on Russian oil exports, and involve a ban on the financing, shipping, and insurance of Russian oil cargoes to any country that does not comply with the cap, which has yet to be set.
According to the Bloomberg report, some of the solutions on the table include higher volumes of pipeline oil coming from Russia into China, the establishment of a designated bank to handle the payments, and ship-to-ship transfers, which are commonly used in the transportation of sanctioned Iranian oil.
Meanwhile, India is also preparing for the EU Russian oil embargo: it has increased its intake of Russian crude, importing 900,000 bpd in October, according to Indian media. The amount was the highest on record and represented 22 percent of India’s total oil imports for that month.
“But future purchases of Russian crudes by Indian refiners will depend on how the EU ban shapes up the seaborne trade and whether Russian crudes make economic sense given high freight rates and the market structure," The Telegraph quoted an S&P Global Commodities analyst as saying.
According to Bloomberg sources, the Chinese authorities have not yet settled on a solution to the embargo-related challenges to continued supplies of Russian oil. Refiners appear to be especially worried about insurance as European majors in that industry begin to prepare for the sanctions, and about re-insurance.
One way to settle these concerns, Bloomberg notes, is to turn to purchases of Russian oil on a delivered basis, meaning the responsibility of finding tankers and insuring cargoes lays with the seller.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.