Key Takeaways
China is buying Russian oil from the Far East to replace supplies they were getting from the Middle East.
Russia’s Eastern Siberia-Pacific Ocean blend is substituting for Saudi and other Middle East oil imports due to the Iran conflict.
China banned petroleum product exports from March through June and only resumed reexports in July.
China buys Russian oil at a discount, currently about $1 to $2 dollars below Brent, but before the Iran conflict, it was $10 per barrel below Brent crude oil due to sanctions.
China’s state-owned Sinopec Corp., the world’s largest refiner, has been purchasing Far East Russian oil to compensate for oil supplies it had been getting from the Middle East. Before the Iran conflict, Sinopec had bought half its crude oil from the Middle East and was among Saudi Arabia’s biggest customers. Instead, Sinopec bought 30 to 40 shipments, or about 241,000 to 320,000 barrels per day of Russia’s Eastern Siberia-Pacific Ocean blend for July to September deliveries, which is about 5% or 6% of Sinopec’s processing capacity of 5.2 million barrels per day. China, the world’s top importer, cut its June oil purchases by 41% from year-earlier levels, and it banned refined product exports due to the Iran war. Because China has partially lifted the fuel export restrictions it imposed earlier this year and is allowing refiners to export 2.7 million metric tons, it is upping its oil imports.
Sinopec secured about 7.4 million barrels of Russia’s Siberia-Pacific Ocean blend in July, mostly delivered into Rizhao port in the refining hub of Shandong province, and it has bought at least 10 cargoes each for August and September. Sinopec’s purchases of Russian oil, which is cheaper than other grades from sources such as Brazil and West Africa, have helped it maintain relatively stable throughput and ship surplus fuel on strong export margins. The oil is typically shipped in Aframax vessels capable of carrying 740,000 barrels.
Sinopec did not buy any Saudi crude oil for June and July, and bought only 2 million barrels in August. It imported 20 million barrels from Saudi Arabia in both March and April, and 11 million barrels each month on average in the year before the Iran war started.
China and India were Russia’s biggest oil customers since the Russian invasion of Ukraine began due to its discounted cost. When the United States imposed sanctions on Russia’s top producers Rosneft and Lukoil, China’s state refiners suspended purchases. Because China does not recognize “unilateral sanctions,” its independent refiners (often referred to as its “teapot” refiners) continued buying Russian oil. Sinopec resumed Russian oil purchases in March and April after a temporary U.S. waiver, buying about 10 cargoes and increasing volumes after the waiver expired. Since the early days of the Ukraine war, Sinopec has bought Russian oil using Chinese yuan.
Recent September-loading for Russia’s Eastern Siberia-Pacific Ocean blend was fixed at a $1–$2 per barrel discount to Brent oil, the international benchmark, making it about $10 a barrel less expensive than competing grades such as Oman and Brazil’s Tupi. Before the Iran war, it traded at about a $10 per barrel discount.
China Is Exporting Petroleum Products Again
China cut fuel exports from March through June to protect domestic supplies after the Iran war disrupted crude oil flows and forced a sharp drop in imports. It began loosening the export restrictions in July following an interim peace deal between the United States and Iran. On August 4, China granted refiners temporary approval to ship 2.7 million metric tons to destinations excluding Hong Kong and Macau this month. Refiners are allowed to roll over some of the August allowances into September due to the tight timeline for spot sales, which can result in export volumes being lower than allowed.
Including shipments to Hong Kong and jet fuel refueling for international flights at Chinese airports, August exports of gasoline, diesel and jet fuel are estimated to reach 3.6 to 3.7 million metric tons. Those exports compare with average monthly exports of 3.04 million metric tons of gasoline, diesel and jet fuel combined in 2025, and are above refiners’ planned July exports of 2.5 million metric tons. Because of the tight scheduling window and uncertainty about oil deliveries amid the Middle East conflict, refiners may not be able to meet the allowed levels. Refiners must prove that they have sufficient stockpiles for local sales and have a production plan in place before receiving approval for export quotas.
Conclusion
China is purchasing oil from Russia, specifically its Eastern Siberia-Pacific Ocean blend, to offset lower crude oil imports from the Middle East due to the Iran conflict. China banned petroleum product exports from March through June and only resumed reexports in July. For August, it is allowing 2.7 million metric tons of exports, which refiners can roll over to September if they are unable to meet that export level. China buys Russian oil at a discount, currently about $1 to $2 per barrel below Brent, but before the Iran conflict it was $10 per barrel below Brent crude oil.
