China’s oil import market is in a state of muddle, clouded by a confusing mix of new sanctions, domestic quota shortages, and political silence. Chinese refiners are shunning Russian oil, but the reasons are complex and overlapping.
The primary driver is fear. US sanctions on Rosneft and Lukoil, coupled with the UK/EU blacklisting of Chinese refiner Yulong Petrochemical, have spooked the market. State-owned Sinopec and PetroChina are canceling cargoes, and private “teapots” are in retreat, afraid of being next.
This has cratered demand for Russian crude, with ESPO prices plunging. Rystad Energy estimates 400,000 barrels a day are affected, nearly half of China’s Russian imports. This is a direct hit to Moscow’s revenues, a key goal of Western allies.
Adding to the confusion is the domestic situation. Teapot refiners are reportedly running up against a shortage of crude import quotas, a problem tied to recent tax changes. This means their ability to buy Russian oil is impeded for the rest of the year, even if they were willing to risk the sanctions.
Finally, a recent high-stakes meeting between Donald Trump and Xi Jinping failed to provide clarity. While they agreed on semiconductors and soybeans, the public readouts were silent on the Russian oil issue, leaving refiners to navigate the muddle on their own.
