Reuters: China's top refiner pivots to Russian crude as Gulf flows weaken

China's state-owned Sinopec, the world's largest oil refiner, has significantly increased imports of Russian crude from the country's Far East to offset reduced supplies from the Middle East following disruptions caused by the Iran war, according to traders and shipping data, Reuters reports.

Industry sources said Sinopec has purchased between 30 and 40 cargoes of Russia's Eastern Siberia-Pacific Ocean (ESPO) crude for delivery between July and September, equivalent to roughly 241,000-320,000 barrels per day. The volumes account for around 5% to 6% of the company's 5.2 million-barrel-per-day refining capacity.

The move has enabled the refiner to maintain relatively stable processing rates while capitalizing on favorable export margins for refined fuels. Russian ESPO crude has become particularly attractive as it is substantially cheaper than competing grades from Brazil, West Africa, and the Middle East.

A Sinopec representative declined to comment on the company's procurement strategy, saying it does not publicly discuss operational matters.

According to Emma Li, lead China analyst at Vortexa Analytics, Sinopec's buying pattern reflects a selective recovery in crude demand rather than a broad increase in imports.

"Sinopec's crude demand appears to have bottomed out following the easing of fuel export restrictions, but the recovery remains selective," Li said.

China, the world's largest crude importer, sharply reduced oil imports after the outbreak of the Iran war, with June purchases falling 41% compared with the same period a year earlier. However, Beijing has since relaxed restrictions on fuel exports for July and August, prompting refiners to adjust procurement strategies.

Li noted that import demand is increasingly focused on reliable and cost-effective supplies.

"Rather than broad-based import growth, demand is shifting towards barrels with greater delivery certainty and lower freight costs - primarily onshore inventories and short-haul Russian Far East cargoes," she told Reuters.

Shipping data indicates Sinopec imported approximately 7.4 million barrels of ESPO crude in July, primarily through Rizhao port in Shandong Province. The company has also secured at least 10 cargoes each for August and September.

After suspending purchases from major Russian producers last October following US sanctions on companies including Rosneft and Lukoil, Sinopec resumed imports earlier this year under a temporary US waiver. According to sources familiar with the transactions, recent ESPO purchases have been conducted through intermediaries rather than sanctioned entities and have continued to be settled in Chinese yuan.

The shift has coincided with a sharp decline in Saudi crude imports. Traders said Sinopec imported no Saudi oil in June or July and only 2 million barrels in August, compared with around 20 million barrels in both March and April before the Iran war disrupted regional supply chains.

By Vafa Guliyeva