Chinese State-Owned Oil Firms Resume Imports of Russian Crude

After a temporary stop at the end 2022, Sinopec and PetroChina, state-owned Chinese oil companies, have resumed buying low-cost Russian crude. Report According to Reuters, this is a sign that the superpowers could form an energy alliance. 

This move is just in time for the European Union to impose an embargo Ukraine conflict has impacted Russian crude oil prices. Russian Urals crude oil, which is normally used in Europe, can now be sold to India or China at a lower price.

PetroChina was granted permission to buy Urals crude from large discount trading companies. The company will receive approximately 1.5 million barrels Urals crude oil in the next month. Unipec (the trading arm of Sinopec) will also resume imports but the quantity and delivery location is not yet known.

Both state-owned refiners can only purchase Russian crude that has been delivered to China by companies that handle payments to Russian producers, as well as arrange for shipping and insurance.

Chinese oil refiners purchase cheap Russian crude to help reduce costs and improve profit margins. This is reportedly in response to China’s rebounding fuel demand. Decision To end its draconian zero COVID policy.

According to data from Kpler and Refinitiv, PetroChina has imported 730,000 barrels of Urals crude oil since October and November. Unipec is one of the largest buyers of Russian crude oils last year, when Russia and the West stopped trading with each other.

“It’s not a surprise to see China’s state-owned refiners taking Russian oil at this moment,” One Chinese-based oil trader spoke to the agency. “Prices of Urals are well below the price cap, and the cheap feedstocks are timely as they would increase refining throughput when China’s demand picks up.” 

But, the resumption or initiation of trade is not a violation of international sanction. To avoid scrutiny, the companies aren’t using insurance or ships from western countries and instead use middlemen. The Russian oil trade is hindered by shipping and insurance. As sanctions continue to apply to Russia’s financial institutions, and insurance companies, they are unable to pay out in case of an accident. 

Kpler data indicates that China’s Urals crude oil imports dropped to 1.45million barrels in December, from an August peak of 9.67million barrels. They rebounded in January, and they are expected to increase in the next months. Unipec and PetroChina have not yet commented on the return to discounted Russian crude oil purchases.