- State Refiners Halt ESPO Purchases After US Targets Rosneft and Lukoil.
- Rizhao Terminal Sanctions Tighten Pressure on Iranian Oil Flows.
- Private Teapots Retreat From Russian Grades Amid Rising Risk.
The expanding sanctions from the US and Europe on Chinese ports and refiners are starting to slow down the flow of Russian and Iranian crude oil to China, which is the largest importer in the world. State-owned processors have hit the brakes on buying ESPO crude—China’s primary Russian import, after the US imposed sanctions on Rosneft PJSC and Lukoil PJSC. Additionally, sanctions on the Rizhao terminal, responsible for about 10% of China’s crude imports, are also limiting the inflow of Iranian oil, reports gCaptain.
Refiners Are Treading Carefully Amid Western Pressure
Some private “teapot” refiners, who usually handle sensitive barrels with ease, are now steering clear of Russian Far East grades. This shift in behaviour comes after the EU and UK imposed sanctions on Shandong Yulong Petrochemical Co., a significant buyer of ESPO.
Market sentiment has shifted, with analysts noting that the fear factor is unusually high. As Vandana Hari of Vanda Insights said: “US sanctions on Rosneft and Lukoil could be a little bit of a game-changer.”
Impact Reaches Beyond China as India Cuts Back
This pullback is happening alongside Indian refiners also scaling back on Russian purchases, suggesting that Western sanctions might finally be making a dent in the Kremlin’s oil revenues. However, the resilience of already-blacklisted ports like Dongjiakou in Shandong indicates that oil flows could bounce back unless enforcement remains robust.
Significant Drops in Russian and Iranian Oil Imports
According to Rystad Energy, China’s seaborne imports of Russian crude could plummet by 500,000 to 800,000 barrels per day, which is a staggering drop of up to two-thirds. Iranian imports might also see a decline of 200,000 to 400,000 barrels per day, translating to a decrease of around 30%.
According to Emma Li of Vortexa, a surplus of sensitive crude is now building: “China’s private refiners, or teapots, are running short of import quotas… and sellers are desperate to get rid of them,” pressuring prices downward.
High Stockpiles and Limited Quotas Are Further Reducing Demand
Iranian imports are still low following the blacklisting of Rizhao, with stockpiles in Shandong already high and private refiners lacking new import quotas. Consequently, the amount of Iranian crude stored at sea has surged to 48 million barrels, the highest level in over two years, as reported by Kpler. Nearly 40% of this is anchored in the Singapore Strait, with a similar amount in the Yellow and South China Seas.
Blacklisted Ports Still Handling Sensitive Flows
Despite US sanctions announced in August, Dongjiakou port is again moving large volumes of Iranian oil. Its continued activity signals that for some traders, the commercial upside still outweighs the risks involved.
Quota Shortages and Cautious Buying Ahead
The year-end shortage of import quotas for private refiners may also be contributing to reduced purchases, prompting potential requests for additional allocations. Even if new quotas are issued, refiners may remain cautious. As Jianan Sun from Energy Aspects noted: “Time will be needed to firm up new procurement channels and supply chains.”
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Source: gCaptain
