China Keeps Feasting on Russian Oil

[beijingwalker]

China Keeps Feasting on Russian Oil​

Published:
Thu, Jun 30, 2022

China is importing Russian crude at record rates, and its insatiable appetite for the discounted barrels looks unlikely to wane in the near term. China's imports of Russian crude could exceed 2 million barrels per day in June, and its July volumes already look strong. Chinese national oil companies (NOCs), along with several independent refiners, are most responsible for the surge in demand, snapping up almost all of the East Siberia-Pacific Ocean (Espo) crude on offer while grabbing significant volumes of Urals, too.

China imported a record 1.99 million b/d of Russian crude in May. It landed 1.13 million b/d of seaborne Russian crude in May, said Emma Li, a China-focused analyst at data analytics firm Vortexa. That means pipeline crude accounted for practically all of the other 856,000 b/d of imported Russian crude. Seaborne Russian imports arriving at Chinese ports are expected to rise by 72,000 b/d to 1.21 million b/d in June, according to ship-tracking data, Li added. Assuming pipeline imports stay at the same level as May, this would push up China’s June-arrival imports to 2.06 million b/d. This forecast could be too low since it likely does not include an Aframax Urals cargo that underwent a ship-to-ship transfer and subsequently arrived in China in June. Aframaxes typically carry around 600,000 barrels or more, equal to 20,000 b/d. China imports Russian crude through two main pipeline systems — the Espo spurs into China, with a capacity of 700,000 b/d, and pipelines running through Kazakhstan. The Kazakh pipelines have a capacity of 400,000 b/d, although a deal to send Russian crude through those lines is for 200,000 b/d. The deal was recently extended for another decade in February.

Espo and Urals account for 81% of China’s seaborne imports of Russian crude in June. Urals imports are likely to stay relatively stable in July, while Chinese players look set to extend their domination of the Espo spot market. There had been some doubts about whether China would continue buying lots of Espo after Russia's Feb. 24 invasion of Ukraine, but these have been erased. June-arrival seaborne imports of Espo are expected to drop by 23,000 b/d from May to 753,000 b/d in June, according to Li. But only around 757,000 b/d of seaborne spot Espo was available for June loading. Most seaborne Espo spot volumes arrive at Chinese ports within the same month as they are purchased, since tankers take less than a week to get from the Espo export port of Kozmino to Northeast China. June-arrival Urals imports are expected to dip by 4,000 b/d from May to 225,000 b/d, Li added. But data intelligence company Kpler sees higher June-arrival Urals volumes of 264,000 b/d, with July-arrival imports so far at 212,000 b/d. Vortexa’s count of Russian imports includes CPC Blend, which is a blend of both Russian and Kazakh crudes. CPC Blend volumes are expected to jump by 98,000 b/d from May to 133,000 b/d in June, Li said.

With Russian crude forced to sell at much cheaper prices, few Chinese players have been able to resist it in this red-hot oil market. The prices are too attractive relative to other, similar crude grades. This could make it difficult for the West to get buyers like China and India on board with any price cap scheme for Russian oil — unless it results in even cheaper prices. China’s largest refiner Sinopec, its second-largest refiner PetroChina, China National Offshore Oil Corp. (CNOOC) and Shandong independent refiners are among the likely buyers or traders of Espo arriving at Chinese ports in June, according to Kpler. And so far for July-arrival Espo cargoes, CNOOC and Shandong independents are among the likely buyers or traders, Kpler adds. For Urals, Sinopec, CNOOC and Zhenhua are among the buyers or traders of June-arrival volumes, while PetroChina and Shandong independents have bought or traded July-arrival cargoes, Kpler notes. One notable exception among China’s NOCs has been Sinochem, a trader and operator of the 300,000 b/d Quanzhou refinery. Sinochem has been avoiding Russian crude postwar, market sources report.

China Keeps Feasting on Russian Oil

China is importing Russian crude at record rates, and its insatiable appetite for the discounted barrels looks unlikely to wane in the near term.

www.energyintel.com

 

[beijingwalker]

China obvious bought way more oil and gas than she really needs, we should resell these oil and gas at a rip-off price to Europe, and EU badly needs them and will be very grateful for China's help.

 

[Communism]

China obvious bought way more oil and gas than she really needs, we should resell these oil and gas at a rip-off price to Europe, and EU badly needs them and will be very grateful for China's help.

Until it makes up 100% of China's oil purchases, it makes no sense to re-export them.

I'm not sure why people are forgetting that China is also still in the middle of an energy crisis that is being papered over with subsidies.

 

[beijingwalker]

Until it makes up 100% of China's oil purchases, it makes no sense to re-export them.

I'm not sure why people are forgetting that China is also still in the middle of an energy crisis that is being papered over with subsidies.

But with the massive profit we make from EU, we can buy more Russia gas and oil for ourselves. we've got the Russia energy and EU pays the bill.

 

[Communism]

But with the massive profit we make from EU, we can buy more Russia gas and oil for ourselves.

The opportunity cost of having to buy non-russian spot crude needs to be accounted for.

That's why it doesn't actually make any sense until it replaces all of china's spot crude purchases.

For refined products it might make sense sure.

The transport cost from east coast of china to europe is super high though.

Everything i see talks about the discount on urals.

I haven't seen anyone mention what the actual discount is on ESPO.

I'm guessing the discount is less than for urals.

 

[MH.Yang]

From the perspective of energy security, we cannot rely on the energy of only one country.
Even if Russia's energy is cheap, there should be a ceiling on the number of purchases. I personally believe that Russian oil can be used for strategic reserves, but we should not use more than 25% of oil from any source for daily use.

 

[ckf]

From the perspective of energy security, we cannot rely on the energy of only one country.
Even if Russia's energy is cheap, there should be a ceiling on the number of purchases. I personally believe that Russian oil can be used for strategic reserves, but we should not use more than 25% of oil from any source for daily use.

Nuclear + renewable is going to become much bigger component of energy mix. Oil is crucial to military logistics though, and Russia probably the most secure. I think US/EU led hedgemony is forcing Russia + China energy infrastructure partnership and will become more crucial as cold war continues unabated. From China's perspective, if there's a stable oil and gas from Russia, China actually does not need to challenge US Navy dominance for access to straight of Hormuz and straight of Malacca, which is really expensive to maintain and build a large Navy to challenge US Navy. If there's a conflict in Taiwan, US most likely block China's oil imports and industrial export. I really don't understand Biden's infatuation with defeating Russia and gifting China with cheap stable oil and gas. China also has access to Kazakhstan oil + increased local production + non russian oil imports to balance dependence on Russia. If Russia succesfully implement North South gas pipelines to India and Pakistan as well as Iran possibly building out west east pipeline through Afghanistan in the future, energy security will transform central asia, India and China. Biden and Eu really miscalculated the ability of sanctions to cripple Russia and the long term consequences of sanction backfiring on USD dominance as well as aiding China's economic rise. Right now, China has much lower inflation and industrial production cost than anywhere else in the world. That will not change for the next decade if Putin stays in power.

 

[gambit]

China obvious bought way more oil and gas than she really needs, we should resell these oil and gas at a rip-off price to Europe, and EU badly needs them and will be very grateful for China's help.

You did with Venezuelan oil. Chavez made a great deal to China, part of it was because Venezuelan crude is not the prime 'sweet' grade in the first place because of the higher sulfur content. So Chavez offered Venezuelan crude to China at a discount and to pay for the shipping cost back to China. Except China omitted the 'back to China' part of the deal. What China did was loaded up Chinese tankers, sailed north to Texas refineries, and sold the Venezuelan crude at an additional discount, then sail those tankers elsewhere for more oil.

China cannot simply sell Russian crude at 'rip-off' prices to the EU. Different grades have different market prices based on different needs.

Urals oil - Wikipedia

en.wikipedia.org

Crude oils have different quality characteristics - U.S. Energy Information Administration (EIA)

www.eia.gov

Crude oils that are light (higher degrees of API gravity, or lower density) and sweet (low sulfur content) are usually priced higher than heavy, sour crude oils. This is partly because gasoline and diesel fuel, which typically sell at a significant premium to residual fuel oil and other "bottom of the barrel" products, can usually be more easily and cheaply produced using light, sweet crude oil. The light sweet grades are desirable because they can be processed with far less sophisticated and energy-intensive processes/refineries. The figure shows select crude types from around the world with their corresponding sulfur content and density characteristics.​

We can see that Russian crude are mostly mid-grade. For the short term, China will get some profits but not at rip-off levels. For the long term, as in into the next US presidential administration which is likely to be Republican, China is better off selling Russian crude to US refiners again.

 

[Communism]

You did with Venezuelan oil. Chavez made a great deal to China, part of it was because Venezuelan crude is not the prime 'sweet' grade in the first place because of the higher sulfur content. So Chavez offered Venezuelan crude to China at a discount and to pay for the shipping cost back to China. Except China omitted the 'back to China' part of the deal. What China did was loaded up Chinese tankers, sailed north to Texas refineries, and sold the Venezuelan crude at an additional discount, then sail those tankers elsewhere for more oil.

China cannot simply sell Russian crude at 'rip-off' prices to the EU. Different grades have different market prices based on different needs.

Urals oil - Wikipedia

en.wikipedia.org

Crude oils have different quality characteristics - U.S. Energy Information Administration (EIA)

www.eia.gov

Crude oils that are light (higher degrees of API gravity, or lower density) and sweet (low sulfur content) are usually priced higher than heavy, sour crude oils. This is partly because gasoline and diesel fuel, which typically sell at a significant premium to residual fuel oil and other "bottom of the barrel" products, can usually be more easily and cheaply produced using light, sweet crude oil. The light sweet grades are desirable because they can be processed with far less sophisticated and energy-intensive processes/refineries. The figure shows select crude types from around the world with their corresponding sulfur content and density characteristics.​

We can see that Russian crude are mostly mid-grade. For the short term, China will get some profits but not at rip-off levels. For the long term, as in into the next US presidential administration which is likely to be Republican, China is better off selling Russian crude to US refiners again.

Selling Venezuelan crude to the US makes perfect sense since the U.S. expropriated PDVSA's refining capacity in the U.S. which is designed for heavy crude processing.

Selling Urals to the U.S. has a cost for ship to ship transfer and higher transport costs in general to evade sanctions.

It probably makes more sense to simply ship Urals on VLCCs/ULCCs (the largest and cheapest per unit crude carriers) to China and then refine the crude into finished products and use it in China while selling the excess to East Asian and SEA countries.

It might make sense to sell refined products from that to the U.S. west coast too.

The trip back to Europe from the Chinese east coast is simply very long and expensive though, so it might not make much sense to do so.

Implementing economic sanctions on Russia was the whole point of baiting Russia to escalate in Ukraine, to the point that the U.S. got so impatient that it took until 2022 for the plan to succeed, as can be noticed by the claiming that Russia would "imminently invade Ukraine" every single day since 2014.

The U.S. is highly unlikely to remove sanctions on Russia in the near or medium term, as the implementation of economic sanctions was the main point of the bait.

The main economic incentive for the U.S. to keep the sanctions game up with Russia going forwards will be/is the replacing of Russian exports to Europe with U.S. exports to Europe, which will help to keep the U.S. oligarchs connected with those interest in line.

If the U.S. stops most energy sanctions on Russia, the Europeans would be able to weasel their way around their own energy sanctions against Russia, which would go against those carefully crafted webs of interests.

 

[gambit]

Selling Venezuelan crude to the US makes perfect sense since the U.S. expropriated PDVSA's refining capacity in the U.S. which is designed for heavy crude processing.

Actually, back then, Venezuelan crude was lowest on the Texas refineries' list, because of its higher sulfur content. There were other grades from other countries that paid more for a higher placement on their list. Even so, China still made good profits selling to US refiners. So we really did not 'expropriated' anything from Venezuela. Stop blaming US for Chavez incompetence.

 

[Communism]

Actually, back then, Venezuelan crude was lowest on the Texas refineries' list, because of its higher sulfur content. There were other grades from other countries that paid more for a higher placement on their list. Even so, China still made good profits selling to US refiners. So we really did not 'expropriated' anything from Venezuela. Stop blaming US for Chavez incompetence.

Lol, you don't even know about PDVSA's enormous refining capacity in the U.S.?

The reason why the Russian sanctions badly hit the U.S.'s refining capacity is because the U.S. was relying on Russian heavy crude to replace Venezuelan (due to sanctions) and Mexican (due to depletion) heavy crude to run their expropriated PDVSA refineries at proper efficiency levels.

This has caused the crack spreads in the U.S. to absolutely skyrocket, which is what is letting India so easily export refined products to the U.S. despite the enormous distance and therefore transport cost.

 

[flameboard]

Pakistan needs to act like a country and look out for its own interests. The financially instability could be delayed or offset

 

[karachidude86]

Can't we get Russian Oil through China, the transit could be cheap through a established route to the Karachi port?

 

[Communism]

Can't we get Russian Oil through China, the transit could be cheap through a established route to the Karachi port?

Pakistan is way closer to the Urals crude (which is the heavily discounted one, due to being right next to Europe).

Makes no sense for Pakistan to import Russian crude through China.

 

[MH.Yang]

Can't we get Russian Oil through China, the transit could be cheap through a established route to the Karachi port?

The biggest obstacle preventing Pakistan from importing Russian oil is the USA.
If you want to deceive the USA with "China's oil", it is obviously impossible. Americans will not believe that China will export oil.
And with the harsh attitude of Americans towards Pakistan, they will not pretend not to know that it is Russian oil.