China becomes largest buyer of Russian oil as Saudi Arabia slips to second place
China has become the biggest importer of Russian oil, surpassing Saudi Arabia, according to the General Administration of Customs of the People’s Republic of China. Russia shipped 15.68 million tonnes of oil to China in January and February 2023, up 23.8% from the corresponding period in 2022. Saudi Arabia, which was China’s top supplier of crude oil in 2022, shipped 13.92 million tonnes in the same period in 2023, down from 1.81 million barrels per day (bpd) in the previous year. The decline was due to the increase in the price of Saudi oil, while Russian oil was available at a discount due to Western sanctions.
Discounted Russian oil benefits Chinese independent refiners
Western sanctions and a cap on seaborne Russian crude following the country’s invasion of Ukraine have led to a trading discount for the oil. Independent Chinese refiners in Shandong province have benefited from this shift in pricing power, as they were able to purchase Russian oil at deep discounts to international benchmarks. February-arriving Russian ESPO crude at Shandong ports was bought in January at a discount of about $8 relative to the ICE Brent benchmark. The pricing advantage of the oil has, however, been reduced due to the entry of private Indian refiners into the ESPO market.
State-owned refiners resume purchases of Russian oil
After a brief pause in late 2022, state-owned Sinopec and PetroChina resumed their purchases of Russian Urals grade cargoes in February. China has used intermediary traders to handle shipping and insurance of Russian crude to avoid violating Western sanctions. With domestic fuel demand rising due to the lifting of COVID-19 restrictions, the demand for Russian oil has increased.
Imports from Malaysia up by 144.2%
Customs data also showed that Malaysia’s imports were 0.65 million bpd over the period, up 144.2% from the same period in the previous year. Malaysia is often used as an intermediary point for sanctioned cargoes from Iran and Venezuela.