Singapore — China’s Sinopec Corp has cut its purchases of Russia’s ESPO crude oil in July as other buyers, including from India, were willing to pay higher prices, trade sources said.
A pull-back in Russian oil purchases by Sinopec, Asia’s biggest refiner, suggests that its earlier buying was driven by economics rather than political considerations.
Chinese and Indian oil companies have increased their Russian oil imports in May and June despite Western sanctions on Russia as a result of the Ukraine conflict that have upended the global oil trade.
China has refrained from condemning Russia’s invasion of Ukraine that started on Feb. 24, which Moscow calls a “special military operation”, and in a meeting on Feb. 4 the leaders of the two countries said their friendship had “no limits”.
Sinopec, through its trading arm Unipec, is expected to lift fewer cargoes in July after submitting lower bids to Russian exporters who then sold the cargos to trading companies and other Chinese clients that bid higher, said four sources who participate in the market and declined to be identified.
Sinopec had been the biggest buyer of ESPO, which loads from the port of Kozmino in Russia’s Far East, in the past two months, snapping up an estimated 20 million barrels, according to traders and data from tanker tracker Vortexa Analytics.
Sinopec bid at discounts of about $20 a barrel below the price of Middle East benchmark Dubai on a free-on-board basis for July shipments, similar to what it paying for cargoes in May and June, while deals were done at $8 to $13 discounts, the sources said.
“Sinopec may only lift a very small amount as their bids were too low for the Russians,” said one of the four sources, a China-based trading executive.
A Sinopec spokesman declined to comment on the company’s purchases.
The companies that beat out Sinopec for the ESPO cargoes in July include Dubai-based trader Coral Energy, state-owned companies CNOOC, PetroChina, and Shandong Port International Trade, which is backed by the local provincial government, according to three trading sources and data from Vortexa.
Russia is expected to raise its ESPO exports from Kozmino to a record of 880,000 barrels per day (bpd) in July, Reuters reported on June 7, from an average of 750,000 bpd in 2022.
Swiss-based trader Paramount Energy, which specializes in marketing the output of small, independent Russian producers, is expected to lift around 7 million barrels of ESPO in July, one of the largest lifters, said two sources with knowledge of shipping fixtures.
A regular marketer of ESPO crude to Chinese independent refiners since 2016, Paramount has expanded its China marketing in recent months by working with Chinese state-run trader Zhenhua Oil.
Paramount Energy declined to comment on its July volumes but it said it has delivered Russian cargoes to customers under long-term commercial contracts established before Feb. 24, when Russia invaded Ukraine.
“The company is working to reduce its trading of Russian crude as these long-term contracts expire, a process that is ongoing,” said a company spokesperson.
Top Russian exporter Rosneft is also likely sending more ESPO shipments to India under its recent supply agreement with state-run Indian Oil Corp.
Before the war, China’s independent refiners purchased nearly all of the ESPO cargoes available and the crude rarely flowed to India because the longer voyage reduced the profitability of purchasing it.
So far in July four shipments totalling close to 3 million barrels were destined for India, up from three in June, according to traders and Vortexa data.
(Reporting by Chen Aizhu; Editing by Florence Tan and Christian Schmollinger) – Reuters
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