Rosneft and Lukoil Sanctions Spark Chinese Retreat

New US sanctions on Russian energy giants Rosneft PJSC and Lukoil PJSC have successfully sparked a retreat by Chinese refiners. State-owned firms, including Sinopec and PetroChina Co., are canceling Russian crude cargoes, fearing penalties by association.
The apprehension has been amplified in the private sector. China’s “teapot” refiners are also holding off on purchases. They are particularly alarmed by the recent blacklisting of Shandong Yulong Petrochemical Co. by the UK and EU, viewing it as a clear warning that customers are now fair game.
This sudden halt from China, Russia’s biggest customer, has sent prices for its ESPO crude tumbling. Rystad Energy AS estimates that the disruption affects 400,000 barrels a day, a staggering 45% of China’s oil imports from Russia.
Russia’s position as China’s top supplier was built on heavy discounts offered after its invasion of Ukraine. The US and its allies are now systematically undermining this trade to choke off Moscow’s war-funding oil revenues.
This shift in the global oil map could benefit other suppliers. The US, for example, just agreed to a trade truce with Beijing at a meeting between leaders Donald Trump and Xi Jinping. In a strange twist, the blacklisted Yulong is now buying more Russian oil, as it has been cut off from other suppliers.