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China state refiners shun new Russian oil trades, teapots fly under radar -sources By Reuters

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© Reuters. FILE PHOTO: Smoke spews from chimneys of an oil refinery in Nanjing, east China’s Jiangsu province, December 28, 2006. REUTERS/Sean Yong

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By Chen Aizhu and Florence Tan

SINGAPORE (Reuters) -China’s state refiners are honouring present Russian oil contracts however avoiding new ones regardless of steep reductions, heeding Beijing’s name for warning as western sanctions mount towards Russia over its invasion of Ukraine, six individuals instructed Reuters.

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State-run Sinopec (NYSE:), Asia’s largest refiner, CNOOC (NYSE:), PetroChina and Sinochem have stayed on the sidelines in buying and selling recent Russian cargoes for Might loadings, mentioned the individuals, who all have data of the matter however spoke on situation of anonymity given the sensitivity of the topic.

Chinese language state-owned companies don’t want to be seen as overtly supporting Moscow by shopping for additional volumes of oil, mentioned two of the individuals, after Washington banned Russian oil final month and the European Union slapped sanctions on prime Russian exporter Rosneft and Gazprom (MCX:) Neft.

“SOEs are cautious as their actions may very well be seen as representing the Chinese language authorities and none of them desires to be singled out as a purchaser of Russian oil,” mentioned one of many individuals.

Sinopec and Petrochina declined remark. CNOOC and Sinochem didn’t instantly reply to a request for remark.

China and Russia have developed more and more shut ties lately, and as not too long ago as February introduced a “no limits” partnership, and China has refused to sentence Russia’s motion in Ukraine or name it an invasion.

China has repeatedly criticised western sanctions towards Russia, though a senior diplomat mentioned on Saturday that Beijing isn’t intentionally circumventing sanctions on Russia.

China, the world’s largest oil importer, is the highest purchaser of Russian crude at 1.6 million barrels per day, half of which is provided by way of pipelines under government-to-government contracts.

Sources count on China’s state companies to honour its long-term and present contracts for Russian oil however avoid new spot offers.

A drop in China’s imports of Russian oil may immediate its large state refiners to show to different sources, including to world provide considerations that had pushed benchmark costs to 14-year highs close to $140 per barrel in early March after Russia invaded Ukraine on Feb. 24.

Brent futures have since eased, to beneath $110, after america and allies introduced plans to launch shares from strategic reserves. [O/R]

‘RISK CONTROL AND COMPLIANCE FIRST’

Earlier than the Ukraine disaster, Russia provided 15% of China’s oil imports – half of that by way of the East Siberian and Atasu-Alashankou pipelines and the remaining by tankers from its Black Sea, Baltic Sea and Far East ports.

Unipec, the buying and selling arm of Sinopec and a number one Russian oil purchaser, has warned its world groups at common inside conferences in latest weeks towards the dangers of coping with Russian oil.

“The message and tone are clear – danger management and compliance comes earlier than income,” mentioned one of many sources who was briefed on the conferences.

“Though Russian oil is massively discounted, there are numerous points like securing delivery insurance coverage and cost snags.”

One other of the sources, with a refinery that frequently processes Russian crude, mentioned his plant was instructed by Unipec to search out substitute to keep up regular operations.

“Past shipments which have arrived in March and resulting from arrive in April, there shall be no extra Russian oil going ahead,” mentioned this supply.

Unipec loaded 500,000 tonnes of Urals from Russia’s Baltic ports in March, the very best quantity in months, provided by Surgutneftegaz on spot and under a Rosneft export tender that Unipec gained for loadings between September 2021 and March 2022, in accordance with merchants and delivery information.

Its newest Urals offers shall be two April-loading shipments totalling 200,000 tonnes from Russian producer Surgutneftegaz, mentioned two merchants with data of the offers.

In distinction, India has thus far booked not less than 14 million barrels, or about 2 million tonnes, of Russian oil since Feb. 24, versus almost 16 million barrels in all of 2021, in accordance with Reuters calculations.

Different state patrons – PetroChina, CNOOC and Sinochem – have shunned Russia’s ESPO mix for Might loading, sources mentioned.

Sinopec is dealing with cost issues even for offers agreed earlier as risk-averse state banks look to scale down financing Russian oil-related offers, the second supply mentioned.

TEAPOTS KEEP DEALS ‘UNDER WRAPS’

Sanction worries have pushed some impartial refiners generally known as teapots, as soon as a dynamic group of consumers consuming a few third of China’s Russian oil imports, to fly under the radar.

“ESPO buying and selling was actually gradual and secretive. Some offers are being accomplished, however particulars are stored under wraps. Nobody desires to be seen shopping for Russian oil in public,” an everyday ESPO vendor mentioned.

To maintain oil flowing, these nimble refiners are deploying different cost mechanisms equivalent to money switch, paying after cargo is delivered and utilizing Chinese language foreign money.

Russian suppliers – Rosneft, Surgutneftegaz and Gazprom Neft, and impartial producers represented by Swiss dealer Paramount Vitality – are anticipated to ship a file 3.3 million tonnes of ESPO from Kozmino port in Might.

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