Russia’s dominant position in the Chinese oil market is crumbling under the weight of new Western sanctions. A “buyers’ strike” has been initiated by both state-owned giants and private “teapot” refiners, who are canceling cargoes and shunning Russian crude.
The fear is twofold. First, the US blacklisted Russian producers Rosneft and Lukoil. Second, the UK and EU blacklisted a Chinese customer, Shandong Yulong Petrochemical Co., sending a shockwave of fear through the market. This has prompted firms like Sinopec and PetroChina to retreat.
The retreat has been catastrophic for Russian crude prices, with the ESPO grade plunging. Rystad Energy AS estimates that 400,000 barrels a day, or up to 45% of China’s Russian oil imports, are affected by this strike.
This is a major victory for the US and its allies, who are trying to choke off Moscow’s oil revenues. Russia had successfully made China its top customer by offering steep discounts after the Ukraine invasion, but that trade is now being systematically dismantled.
As China, the world’s biggest crude importer, looks for alternatives, other suppliers like the US stand to gain. This follows a recent trade truce between leaders Trump and Xi. The summit’s silence on oil, however, has left the market in a state of confusion.