Sinopec Increases Russian Oil Imports to Replace Mideast Supply Cuts, Sources Say

China’s state-owned Sinopec Corp, the world's largest refiner, is significantly increasing its purchases of Russian Far East crude oil to offset a sharp reduction in supplies from the Middle East, according to trade sources and vessel tracking data cited by Reuters.

A Pivot to Russian Crude

Sinopec has reportedly purchased 30 to 40 shipments of Russia’s Eastern Siberia-Pacific Ocean (ESPO) blend for delivery between July and September. This volume equates to approximately 241,000 to 320,000 barrels per day (bpd), representing 5% to 6% of the refiner's total processing capacity of 5.2 million bpd.

Data from ship tracker Vortexa Analytics corroborates the increased activity. According to Emma Li, the firm's lead China analyst, Sinopec secured about 7.4 million barrels of ESPO in July, with further purchases of at least 10 cargoes each for August and September.

"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," Li told Reuters.

Replacing Saudi Barrels

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The move comes as Sinopec drastically cuts its intake from Saudi Arabia, formerly a primary supplier. Trade sources indicate Sinopec bought no Saudi crude for June and July and took only 2 million barrels in August. This is a stark decline from the 20 million barrels it imported in both March and April.

The purchasing shift is driven by both supply disruption and economics. September-loading ESPO was pegged at a discount of $1 to $2 a barrel to the global benchmark Brent. Traders noted this makes the Russian grade about $10 per barrel cheaper than rival grades from the Middle East and Brazil.

Navigating Sanctions and Market Dynamics

While major Chinese state refiners had suspended Russian oil purchases in October following U.S. sanctions, Sinopec resumed buying in March. The recent purchases have been structured to avoid sanctioned entities, with transactions conducted through intermediaries and settled in Chinese yuan, according to four people familiar with the matter.

A Sinopec representative stated that the company does not publicly discuss its operational matters. The increased Russian imports have allowed the refiner to maintain stable throughput despite broader market disruptions and China's overall reduction in crude imports.