Prices for Russia’s key ESPO crude grade have plunged as its most important customers—Chinese refiners—are vanishing from the market. This sudden “buyers’ strike” is being led by state-owned giants Sinopec and PetroChina Co., which have canceled Russian shipments in recent weeks.
The cancellations are a direct reaction to escalating Western sanctions. The US blacklisted Russian producers Rosneft and Lukoil last month, and the UK and EU followed by penalizing one of their customers, Chinese refiner Shandong Yulong Petrochemical Co. This move has terrified other private “teapot” refiners, who are now also holding off on purchases.
The impact is massive. According to consultancy Rystad Energy AS, some 400,000 barrels a day are affected. This represents as much as 45% of China’s total oil imports from Russia, which had recently become its single biggest supplier due to heavy post-invasion discounts.
The US and its allies are deliberately tightening the noose. By targeting not just Russian producers but also their customers, they aim to choke off the oil revenues that fund Moscow’s war in Ukraine. As the world’s biggest crude importer, China’s retreat from Russian oil could force it to seek supplies elsewhere.
This gap could potentially be filled by other suppliers, including the US, which just agreed to a trade truce with Beijing. However, the picture is not entirely bleak for Moscow. The blacklisted Yulong, unable to buy from Western suppliers, has turned to Russia out of necessity. But for most other teapots, a shortage of import quotas presents an additional hurdle to buying Russian crude, even if they dared to.