Oil Daily | Chinese and Indian Refiners Adjust Russian Oil Purchases Amid Sanction Risks and Market Shifts

【Global Oil Supply and Demand】

Chinese refiners are pulling back on Russian oil purchases due to sanction risks and uncertainty over a Russia-Ukraine ceasefire. State-owned companies like Sinopec have suspended buying, while independent refiners are increasing their purchases of cheaper Russian oil, particularly ESPO Blend, amidst reshuffled tanker operations.

OPEC producers in the Middle East are exporting record amounts of refined products, offsetting crude production cuts. Increased refining capacity in the Gulf states has boosted fuel exports, reducing the bullish impact of crude supply restrictions and increasing petroleum revenues without violating production quotas.

India is increasing non-Russian crude imports amid U.S. sanctions concerns, diversifying supply with more oil from Africa and South America. Indian refiners are adapting to sanctions, ensuring Russian oil purchases comply, while imports of Russian crude slightly declined but remain significant.

Despite OPEC's planned production increase, Saudi Arabia is reducing crude shipments to China due to refinery maintenance. This comes amid reshuffled tanker operations facilitating Russian and Iranian oil imports, suggesting lower demand for Saudi crude as uncertainty over cheaper Russian supply eases.

IEA reports global oil supply exceeds demand, driven by U.S. production growth and weak demand. U.S. sanctions on Russia and Iran have not yet impacted loadings significantly, while the U.S. Treasury announced new sanctions on Iran. These factors contribute to price volatility and market pressure.

【Oil-Producing Countries Dynamics】

Qatar follows Saudi Arabia in cutting al-Shaheen crude prices for May deliveries, reflecting a well-supplied market and increased OPEC production, including Nigeria and Kazakhstan surpassing quotas. OPEC plans to unwind output curbs but remains flexible to adjust based on market conditions.

Russia is increasingly using cryptocurrencies for oil trade with China and India to circumvent U.S. sanctions, facilitating yuan and rupee conversion into rubles. Though a small portion of total trade, the use of digital currencies is growing as a means to overcome sanctions.

Qatar prepares to supply Syria with natural gas via Jordan, following Iraq's suspension of crude deliveries and Iran's halted supplies. This aims to boost Syria's power production amidst an energy crisis, with EU considering easing sanctions on Syria's energy sector.

【Latest Oil Policies】

The Trump administration imposed new sanctions on Iran's oil minister and tankers, aiming to curb Tehran's oil revenue and operations. Despite sanctions, Iran continues to export crude, primarily to China, with complex shipping tactics to evade restrictions.

【Industry News】

Guyana canceled the Frontera-CGX joint venture's oil prospecting license for the Corentyne block, consolidating ExxonMobil's dominance in the region. This move strengthens Exxon's position in Guyana's oil industry, where it is poised to expand natural gas and oil production.

Federal employee layoffs are slowing energy project permitting in the U.S. as the Department of Government Efficiency cuts the workforce, impacting agencies crucial for project approvals. Industry leaders stress the need for adequate staffing to ensure compliance and minimize legal challenges.

【Others】

Tankers previously idle due to sanctions are loading Russian ESPO Blend, signaling diminishing sanction effectiveness. Sanctioned tankers are increasingly operational, indicating persistent demand for Russian oil despite geopolitical challenges.