State-owned Sinopec, Asia’s largest refiner, CNOOC, PetroChina and Sinochem stayed away from trading fresh Russian cargo for May shipments, said the people, all of whom have knowledge of the question but spoke on condition of anonymity given the sensitivity of the subject.
Chinese state companies do not want to be seen as openly supporting Moscow by buying additional volumes of oil, two of the people said, after Washington banned Russian oil last month and the European Union imposed sanctions. to the main Russian exporter Rosneft and Gazprom Neft.
“The state-owned companies are cautious because their actions could be seen as representing the Chinese government and none of them want to be singled out as buyers of Russian oil,” one of the people said.
Sinopec and Petrochina declined to comment. CNOOC and Sinochem did not immediately respond to a request for comment.
China and Russia have developed increasingly close ties in recent years, and as recently as February announced a “limitless” partnership. 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 against Russia.
China, the world’s largest oil importer, is the main buyer of Russian crude, with 1.6 million barrels a day, half of which is supplied by pipelines under government-to-government contracts.
Sources expect Chinese state companies to honor their long-term and existing contracts for Russian oil, but avoid entering into new spot contracts.
A drop in Chinese imports of Russian oil could prompt its giant state refiners to turn to other sources, adding to global supply concerns that had pushed benchmark Brent oil prices to their highest level in 14 years, nearly 140 dollars a barrel, at the beginning of March, after the invasion of Ukraine by Russia on February 24.
Brent futures have since fallen below $110 after the United States and its allies announced plans to release stocks from strategic reserves. [O/R]
RISK CONTROL AND COMPLIANCE FIRST
Before the Ukraine crisis, Russia supplied 15% of China’s oil imports – half via the Eastern Siberia and Atasu-Alashankoup pipelines and the rest by tankers from its Black Sea, Baltic Sea and Eastern ports. ‘Far East.
Unipec, the trading arm of Sinopec and one of the main buyers of Russian oil, has warned its global teams in regular internal meetings in recent weeks of the risks involved in trading Russian oil.
“The message and the tone are clear – risk control and compliance come before profits,” said one of the sources briefed on the meetings.
“Although Russian oil is subject to huge discounts, there are many problems such as obtaining marine insurance and hitches in payment.”
Another of the sources, working at a refinery that regularly processes Russian crude, said his plant was told by Unipec to find a replacement to maintain normal operations.
“Beyond the shipments that arrived in March and are due to arrive in April, there will be no more Russian oil in the future,” the source said.
Unipec loaded 500,000 tonnes of Urals from Russia’s Baltic ports in March, the highest volume in months, supplied by Surgutneftegaz on a spot basis and as part of a Rosneft export tender that Unipec won for shipments between September 2021 and March 2022, according to traders and shipping data.
Its latest deals in the Urals will be two April shipments totaling 200,000 tonnes from Russian producer Surgutneftegaz, two traders with knowledge of the deals said.
By contrast, India has so far reserved at least 14 million barrels, or about 2 million tonnes, of Russian oil since February 24, compared to nearly 16 million barrels for the whole of 2021, according to calculations. from Reuters.
Other state buyers – PetroChina, CNOOC and Sinochem – shunned Russia’s ESPO mix for May loading, the sources say.
Sinopec faces payment problems, even for previously concluded contracts, as risk-averse state banks seek to cut funding for Russian oil contracts, the second source said.
LES THIRES KEEP THE AGREEMENTS “BELOW THE ELBOW”.
Sanctions concerns have caused some independent refiners known as teapots, once a vibrant group of customers consuming around a third of China’s Russian oil imports, to fly under the radar.
“The ESPO transactions have been really slow and secretive. Some transactions are happening, but the details are kept under wraps. No one wants to be seen buying Russian oil in public,” said a regular ESPO trader.
To keep oil flowing, these nimble refiners are deploying alternative payment mechanisms such as cash transfer, payment after cargo delivery, and the use of Chinese currency.
Russian suppliers – Rosneft, Surgutneftegaz and Gazprom Neft, as well as independent producers represented by Swiss trader Paramount Energy – are expected to ship a record 3.3 million tonnes of ESPO from the port of Kozmino in May.