US vs Russia: A New Front Opens in the Battle for China’s Oil Market

A new front has opened in the battle for China’s vast oil market, as US sanctions successfully push Russian crude out. Chinese refiners, including state-run Sinopec and PetroChina, are canceling Russian cargoes after the US blacklisted energy giants Rosneft and Lukoil.
This move by the US and its allies, which also included the UK/EU blacklisting of Chinese refiner Yulong Petrochemical, has triggered a “buyers’ strike.” Private “teapot” refiners are also fleeing the market, fearing they’ll be next. This has caused Russian ESPO crude prices to dive.
The scale of the retreat is significant. Rystad Energy AS estimates 400,000 barrels a day are affected, or up to 45% of China’s Russian imports. This is a direct hit on Moscow’s war chest, as Russia had relied on China as its top customer after the Ukraine invasion.
As China, the world’s biggest crude importer, steps back from Russian oil, it will need new suppliers. The US, which just agreed a trade truce with Beijing, is well-positioned to benefit. The meeting between leaders Donald Trump and Xi Jinping, while silent on Russian oil, set a new stage for US-China trade.
The situation is not a total loss for Moscow, however. The blacklisted Yulong, cut off from Western suppliers, has turned to Russia out of necessity. But this is a small consolation, as most other teapots are low on import quotas, further limiting Russia’s sales potential in China.