China will import a record amount of Russian oil in the first half of 2023

GET FREE CHINESE BUSINESS UPDATES

we will send you one myFT Daily Digest Latest Email Rounding sugar trade News every morning.

China is importing record amounts of oil despite a weakening economy as it takes advantage of cheap Russian crude to build reserves and export refined products.

The rise in oil imports to record levels this year comes against a backdrop of a faltering recovery in the world’s second-largest economy.

It shows how sanctions on Russia are reshaping global oil markets, giving China the twin benefits of cheap crude and an opportunity to boost exports.

For the first half of 2023, China imported 11.4 million barrels of crude oil per day, up 11.7 percent year-on-year and 15.3 percent higher than pre-Covid levels, according to Financial Times calculations based on customs data.

“The short answer is that China is building up crude,” said Mukesh Sahdev, head of oil trading at research group Rystad Energy. “They are importing for the future. , , And before the possible stimulus. People are talking about the story of the second half.

Official data on Thursday showed that China imported 2.57 million bpd of Russian crude last month, breaking a record set in May.

In the first half of 2023, China is set to import 2.13 million bpd of oil from Russia, more than Saudi Arabia’s 1.88 million bpd, making Russia the top crude oil supplier to China so far this year.

Analysts differed on the reasoning behind the stock build, with geopolitical risk a further possible explanation.

Sanctions on Russia following its full-scale invasion of Ukraine have brought energy security into major relief for Chinese policy makers. “China could be preparing for any geopolitical situation, Russian cause or crisis in Taiwan,” Sahdev said.

You are viewing a snapshot of an interactive graphic. This is probably due to being offline or JavaScript is disabled in your browser.

Michel Meidan, head of China energy research at the Oxford Institute of Energy Studies, downplayed the security narrative.

“There is certainly a perception in China that the external environment is deteriorating and they are preparing for sanctions, but that has been the perception for years,” Meidan said.

China’s customs data implies that Russian imports have become cheaper than other OPEC+ countries since the war in Ukraine began.

Compared to the unit price of Saudi Arabian crude, Russian oil received a discount of $9 per barrel at the end of 2022 and $11 per barrel in June.

But analysts said given the growth of opaque non-dollar-denominated trade in Russian crude, discounts on Russian oil were lower than those on Iranian or Venezuelan products.

You are viewing a snapshot of an interactive graphic. This is probably due to being offline or JavaScript is disabled in your browser.

The tilt towards Russia appears to be opportunistic rather than systemic change. “I don’t think China is going to attack Russia all out,” Meidan said. “It is a short-term move away from Saudi feedstocks. The Chinese are quite keen to maintain a balance between their suppliers.

“This price is driven by market realities,” Meidan said. “They have these schemes and a state machinery, but then they adapt it in a way that is very sophisticated and capitalistic. One thing that is not appreciated in the West is how fierce the competition is between the (Chinese) big companies.

Analysts at market data provider Kepler pointed to a strong incentive for Chinese refiners to keep producing, given their $3 a barrel margin advantage over their Asian rivals.

Kepler expects China’s advantage of cheap Russian feedstock to help it flood the market, putting pressure on Korean and Japanese producers.

GET FREE CHINESE BUSINESS UPDATES

we will send you one myFT Daily Digest Latest Email Rounding sugar trade News every morning.

China is importing record amounts of oil despite a weakening economy as it takes advantage of cheap Russian crude to build reserves and export refined products.

The rise in oil imports to record levels this year comes against a backdrop of a faltering recovery in the world’s second-largest economy.

It shows how sanctions on Russia are reshaping global oil markets, giving China the twin benefits of cheap crude and an opportunity to boost exports.

For the first half of 2023, China imported 11.4 million barrels of crude oil per day, up 11.7 percent year-on-year and 15.3 percent higher than pre-Covid levels, according to Financial Times calculations based on customs data.

“The short answer is that China is building up crude,” said Mukesh Sahdev, head of oil trading at research group Rystad Energy. “They are importing for the future. , , And before the possible stimulus. People are talking about the story of the second half.

Official data on Thursday showed that China imported 2.57 million bpd of Russian crude last month, breaking a record set in May.

In the first half of 2023, China is set to import 2.13 million bpd of oil from Russia, more than Saudi Arabia’s 1.88 million bpd, making Russia the top crude oil supplier to China so far this year.

Analysts differed on the reasoning behind the stock build, with geopolitical risk a further possible explanation.

Sanctions on Russia following its full-scale invasion of Ukraine have brought energy security into major relief for Chinese policy makers. “China could be preparing for any geopolitical situation, Russian cause or crisis in Taiwan,” Sahdev said.

You are viewing a snapshot of an interactive graphic. This is probably due to being offline or JavaScript is disabled in your browser.

Michel Meidan, head of China energy research at the Oxford Institute of Energy Studies, downplayed the security narrative.

“There is certainly a perception in China that the external environment is deteriorating and they are preparing for sanctions, but that has been the perception for years,” Meidan said.

China’s customs data implies that Russian imports have become cheaper than other OPEC+ countries since the war in Ukraine began.

Compared to the unit price of Saudi Arabian crude, Russian oil received a discount of $9 per barrel at the end of 2022 and $11 per barrel in June.

But analysts said given the growth of opaque non-dollar-denominated trade in Russian crude, discounts on Russian oil were lower than those on Iranian or Venezuelan products.

You are viewing a snapshot of an interactive graphic. This is probably due to being offline or JavaScript is disabled in your browser.

The tilt towards Russia appears to be opportunistic rather than systemic change. “I don’t think China is going to attack Russia all out,” Meidan said. “It is a short-term move away from Saudi feedstocks. The Chinese are quite keen to maintain a balance between their suppliers.

“This price is driven by market realities,” Meidan said. “They have these schemes and a state machinery, but then they adapt it in a way that is very sophisticated and capitalistic. One thing that is not appreciated in the West is how fierce the competition is between the (Chinese) big companies.

Analysts at market data provider Kepler pointed to a strong incentive for Chinese refiners to keep producing, given their $3 a barrel margin advantage over their Asian rivals.

Kepler expects China’s advantage of cheap Russian feedstock to help it flood the market, putting pressure on Korean and Japanese producers.