Chinese state oil firms have suspended purchases of seaborne Russian oil after the US imposed new sanctions on Russian energy giants, Rosneft and Lukoil, multiple trade sources told Reuters on Thursday.
Chinese national oil companies PetroChina, Sinopec, CNOOC, and Zhenhua Oil will “refrain from dealing in seaborne Russian oil at least in the short-term due to concern over sanctions,” the news agency wrote, citing the trade sources.
The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed new sanctions on Rosneft and Lukoil on Wednesday, claiming Russia lacked a “serious commitment to a peace process to end the war in Ukraine.”
The Treasury said its actions would increase pressure on Russia’s energy sector and degrade the Kremlin’s ability to fight its war against Ukraine.
China imports roughly 1.4 million barrels of Russian oil per day (bpd). Beijing’s state oil firms import between 250,000 and 500,000 bpd, while the remainder is purchased by small refiners known as teapots.
Traders speaking with Reuters indicated that the small refiners will likely continue purchases of Russian oil after a brief pause to assess the impact of the sanctions. China also buys approximately 900,000 bpd of Russian oil by pipeline. These purchases will likely not be affected by sanctions, the traders added.
The other major purchaser of Russian oil, India, is also expected to drastically reduce its crude imports from Moscow as a result of the US sanctions.
“A sharp drop in oil demand from Russia’s two largest customers will put a strain on Moscow’s oil revenues and force the world’s top importers to seek alternative supplies and push up global prices,” Reuters wrote.
India and China will instead look to suppliers in West Asia, Africa, and Latin America to make up for the lost supply from Russia, traders said.
World oil prices jumped after the US Treasury announced the new sanctions on Russia’s two biggest oil producers. The sanctions froze all Rosneft and Lukoil assets in the US, while US companies and individuals will be barred from doing business with them.
Washington is also threatening secondary sanctions on foreign financial institutions that do business with the two Russian energy firms, including banks that facilitate sales of Russian oil in China, India, and Turkiye.
In a related development, several oil suppliers from West Asia and Canada have suspended oil sales to China’s Yulong Petrochemical after the UK imposed sanctions on the refiner.
Reuters reported that although the UK imposed sanctions on Yulong to curb Moscow’s oil revenues used to fund the Ukraine war, the move is likely to push it to buy more Russian crude.
Yulong Petrochemical has a capacity of 400,000 bpd and is one of the country’s largest single Russian oil customers.
