China Cuts Russian Oil Purchases By Two Thirds

US sanctions are feared by both PRC state-owned companies and private buyers.

China's major state-owned companies have suspended purchases of Russian ESPO crude, which accounts for the bulk of Russia's seaborne exports to China, after Washington imposed sanctions against Rosneft and Lukoil. Some private refiners, usually more risk-tolerant, also began to avoid it after the European Union and Britain blacklisted the refinery of Shandong Yulong Petrochemical, which was a major buyer of Russian oil. Combined, this has caused uncharacteristic anxiety in the Chinese market, writes Bloomberg.

Rystad Energy estimates that China's average daily imports of Russian crude could fall by 500,000-800,000 barrels, or two-thirds of normal levels, in November. Due to the refusal of Chinese refineries to accept ESPO oil in the previous volumes in the region, there is a surplus of ESPO oil, which puts pressure on prices: the grade (including transportation costs) is now offered at a discount to benchmark grades of $4 per barrel, while in late October it was 50 cents, and earlier ESPO was often sold at a premium.

The resulting fear is what sets the latest U.S. measures apart from previous restrictions, said Vandana Hari, founder of Vanda Insights, a Singapore-based analytics firm.

"The U.S. sanctions on Rosneft and Lukoil could be a tipping point to some extent," he said.

Reminder, on the night of October 23, the United States imposed sanctions on Russia's largest

oil companies, Rosneft and Lukoil. The U.S. Treasury

also called on Russia to immediately agree to a ceasefire.

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