Beijing, China – A recent report by Platts, an international energy agency, revealed that small and independent Chinese refineries saw a sharp 31% drop in their purchases of Russian crude oil in April compared to the previous month.
Shandong refinery crisis and global prices
These independent refineries, mostly concentrated in the coastal province of Shandong and known locally as “teapot” refineries, are among the most prominent and traditional customers of crude oil from Iran and Russia, which are subject to stringent international sanctions.
However, these refineries are experiencing a significant decline in their operating rates. They are currently operating at only half their maximum production capacity due to the sharp and continuous rise in global oil prices, which has severely restricted their profit margins.
Statistical data shows that these refineries collectively purchased only the equivalent of one million barrels of oil per day from Russia last month.
In a related development, official customs data released by China’s General Administration of Customs confirmed this downward trend, showing a significant decline in Beijing’s total oil purchases from Moscow.
Imports of Russian crude by Chinese refineries (both state-owned and independent) reached approximately 2.2 million barrels per day last month. This represents an 11% decrease compared to the previous month of March.
Russian discounts to combat recession
Despite this overall decrease in volumes, customs data revealed that Russian oil delivered to Chinese markets was sold at extremely attractive discounts. It was priced at approximately $20 per barrel below prevailing global market prices and international benchmark crudes.
This decline reflects the growing logistical and financial challenges facing the oil trade under sanctions. Furthermore, structural changes in Chinese domestic demand are emerging, amidst Moscow’s ongoing efforts to maintain its market share in Asia. Moscow is currently relying on offering steep price reductions to counter the sluggish demand from independent refineries.
