Sinopec Cuts Russian Crude Purchases

China’s Sinopec, Asia’s biggest oil refiner, has cut its Russian crude imports in July as it was unwilling to pay higher prices other buyers have been offering. The company has been the largest buyer of Russian ESPO type crude oil in the past two months, acquiring around 20 million barrels. However, in July the company is expected to buy a smaller amount after offering lower bids to Russian exporters.

Sinopec offered $20 a barrel below the price of the Middle East benchmark price for Russian crude for July cargoes. Dubai-based trader Coral Energy, and China’s state-owned companies CNOOC, PetroChina and Shandong Port International Trade outbid Sinopec for this month’s shipments.

India has also come out as a prominent buyer of Russian ESPO crude. That was rarely the case in the past due to long journey times, but buyers in India have started to snap up as the product becomes cheaper. Earlier this month, four tankers carrying almost 3 million barrels of oil headed to India, up from three in June, as refiners there buy up alternatives to grades from the Persian Gulf and West Africa.

China and India have increased purchases of Russian crude at discounted prices since Moscow invaded Ukraine. Russia has made a hefty profit from its sales, which has reached $24 billion in three months.

However, China’s imports of Russian oil dropped 14% since May as Covid lockdowns hit demand. With demand from China dropping, Russia’s profits could take a hit.

The drop-off in Chinese oil purchases raises the issue of whether Russia’s economy can successfully find Asian buyers to replace barrels that no longer ship to Europe.

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