A domestic issue with crude import quotas is compounding the “muddle” for Chinese refiners. Many “teapot” refiners are running low, limiting their ability to buy Russian oil for the rest of the year, even if they were willing to risk sanctions.
This comes as the entire sector is in retreat. Private teapots are terrified by the UK/EU blacklisting of Yulong Petrochemical, while state-owned Sinopec and PetroChina are canceling cargoes due to US sanctions on Rosneft and Lukoil.
This “buyers’ strike” has hit Moscow’s finances hard, causing ESPO crude prices to plunge and affecting 400,000 barrels a day.
The situation is worsened by a lack of political clarity. A recent Trump-Xi summit was conspicuously silent on the oil issue, leaving refiners to guess their government’s stance.
The lack of clarity and quotas means uncertainty will continue to rule the market.