According to official Chinese data, in the first two months of 2023, purchasers snatched up sanctioned Russian oil at deep discounts, pushing Moscow beyond Saudi Arabia as China’s biggest oil supplier.
Around a quarter more Russian oil is imported to China in 2023 than in the same period in 2022. According to figures released by the General Administration of Customs on Monday, Russian imports in January and February were 15.68 million tonnes, or 1.94 million barrels per day (bpd), an increase of 23.8% from the 1.57 million bpd imported during the same time in 2022.
13.92 million tonnes, or 1.72 million barrels per day, of Saudi crude was imported during the two-month period, down from 1.81 million barrels per day a year earlier. In 2022, Saudi Arabia was China’s primary oil supplier, providing the country with 87.49 million metric tonnes of petroleum, or 1.75 million barrels per day.
As a result of Western sanctions and a price ceiling on seaborne Russian petroleum in the wake of Moscow’s invasion of Ukraine, Russian supply now trades at steep discounts to international benchmarks due to a lack of willing buyers. This change in pricing power has been especially beneficial to independent Chinese refiners, many of which are located in Shandong province.
In January, Russian ESPO crude arriving to Shandong ports was purchased at a discount of around $8 relative to the ICE Brent benchmark. But, with the arrival of private Indian refiners into the ESPO market, this pricing advantage has been slightly diminished.
Russian oil demand increased after the relaxation of COVID-19 limitations
Yet, state-owned Sinopec and PetroChina restarted their purchases of Russian Urals grade cargoes in February after a brief halt in late 2022, just before the European Union embargo on Russian oil started, due to increased domestic fuel demand following the relaxation of COVID-19 limitations. To avoid breaking Western sanctions, Chinese refiners export and insure Russian crude through middlemen brokers.
According to customs data, during that time period, imports from Malaysia averaged 0.65 million bpd, an increase of 144.2 percent from the corresponding period in 2017. Several Iranian and Venezuelan shipments transit through Malaysia because of international sanctions.
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