Key facts
- Sinopec has increased purchases of Russian ESPO crude oil.
- The refiner is buying 30-40 shipments for July-September deliveries.
- This move aims to offset supply disruptions from the Middle East due to the Iran war.
- Sinopec has significantly reduced its imports of Saudi crude.
- Russian ESPO crude is being purchased at a discount compared to Middle Eastern and other grades.
China's Sinopec Corp has significantly increased its purchases of Russian ESPO crude oil, acquiring 30 to 40 shipments for delivery between July and September. This strategic move aims to compensate for reduced supplies from the Middle East, exacerbated by the ongoing Iran war. The state-owned refiner is leveraging the lower cost and greater delivery certainty of Russian oil, which is cheaper than alternatives from Brazil and West Africa.
According to ship tracking data and trade sources, Sinopec's enhanced intake of Russian oil amounts to approximately 241,000 to 320,000 barrels per day, representing 5% to 6% of its total processing capacity. This comes as China's overall crude imports have seen a steep decline, with June purchases falling 41% year-on-year. However, Sinopec has eased its fuel export restrictions, allowing it to maintain stable throughput and capitalize on strong export margins.
Sinopec has notably reduced its reliance on Saudi crude, importing only 2 million barrels in August compared to 20 million barrels in both March and April. The ESPO blend is currently trading at a discount of $1 to $2 per barrel to Brent crude for September loadings, making it approximately $10 cheaper than Middle Eastern Oman and Brazilian Tupi grades. Sinopec had previously suspended Russian oil purchases in October following U.S. sanctions but resumed them in March and April, navigating the situation by using intermediaries and avoiding sanctioned entities.