Overview
China's state-owned refining giant has increased imports of crude from Russia's Far East to plug gaps left by weakened Middle East flows amid the Iran war, according to multiple trade sources and independent ship tracking. The additional cargoes of the Eastern Siberia-Pacific Ocean (ESPO) blend have helped the refiner maintain relatively steady processing levels and ship surplus fuel on attractive export margins, even as Beijing temporarily restricted overseas fuel sales earlier in the conflict.
Volumes and scale
Sources and tracking records indicate the refiner purchased between 30 and 40 ESPO shipments for delivery in July through September. Those volumes translate to roughly 241,000 to 320,000 barrels per day. On the company’s stated processing capacity of 5.2 million bpd, that level of ESPO intake amounts to about 5% to 6% of capacity.
Ship tracking by analysts shows roughly 7.4 million barrels of ESPO were secured for July, with the majority delivered into Rizhao port in Shandong province, a major refining hub. Observers tracking the trade also report the refiner contracted at least 10 cargoes for each of August and September.
Operational comments and market signals
A company spokesperson declined to discuss operational details. Emma Li, lead China analyst at ship tracker Vortexa Analytics, said: "Sinopec’s crude demand appears to have bottomed out following the easing of fuel export restrictions, but the recovery remains selective." She added that the shift in demand has favoured barrels offering stronger delivery certainty and lower freight costs.
Li noted that, "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."
Context on China’s crude imports and export curbs
China, the world's largest crude buyer, has sharply reduced overall crude purchases since the Iran war began, with June shipments falling 41% from the same month a year earlier. Beijing imposed limits on fuel exports from March to safeguard domestic supply amid war-related trade disruption, though those export restrictions were partly eased for July and August.
Despite the wider drop in crude inflows, the state's largest refiner appears to have preserved throughput levels by substituting ESPO barrels for Middle Eastern grades, which have become less reliable because of the conflict.
Shift away from Saudi supplies
Prior to the Iran war, nearly half of the refiner’s crude came from the Middle East, and it was one of Saudi Arabia’s largest customers. Trade sources report the company did not take any Saudi crude in June and July, and imported just 2 million barrels in August. By comparison, it received about 20 million barrels in both March and April, and its monthly pre-war intake from Saudi Arabia averaged around 11 million barrels.
Pricing differentials and shipping
For September-loading shipments, ESPO was trading at discounts of roughly $1 to $2 a barrel to Brent, and was about $10 a barrel cheaper than competing grades such as Middle Eastern Oman and Brazil’s Tupi, according to traders. Before the Iran war, ESPO typically traded at a discount of roughly $10 per barrel to Brent.
ESPO is commonly shipped on Aframax tankers, which can carry about 740,000 barrels per vessel. Observers noted the refiner’s recent ESPO purchases did not involve sanctioned entities as counterparties and were arranged via intermediaries, according to several people familiar with the matter.
Sanctions and purchasing history
The refiner had halted purchases of Russian crude in October following U.S. sanctions on major Russian producers, but independent Chinese refiners continued to buy. The refiner restarted purchases in March and April after a temporary U.S. waiver, taking roughly 10 cargoes during that period. Volumes increased further after that waiver expired, as supplies tightened due to the Iran war.
Since the early stages of the Ukraine conflict, the refiner has been making Russian crude payments in Chinese yuan, according to trade sources tracking the flows.
Implications for refining and shipping
The combination of cheaper ESPO grades, shorter voyage distances from the Russian Far East and the refiner’s selective buying has supported domestic crude throughput and helped preserve export margin opportunities. The refiner’s strategy highlights a tilt toward cargoes with greater delivery certainty and lower freight exposure as China adjusts to disrupted Middle Eastern flows.
Summary
The state refiner increased imports of ESPO crude for July-September to offset Middle East supply reductions brought on by the Iran war. Purchases totalled 30-40 cargoes, equal to roughly 241,000-320,000 bpd or about 5-6% of the company's 5.2 million bpd processing capacity. The move has helped stabilise throughput and support export margins, while China has moderated fuel export curbs.
Key points
- Sinopec bought 30-40 ESPO cargoes for July-September, about 241,000-320,000 bpd - around 5-6% of 5.2 million bpd capacity.
- ESPO for September-loading was trading at $1-$2 per barrel below Brent and about $10 cheaper than some rival grades, supporting substitution for Middle Eastern barrels.
- Purchases were largely delivered into Rizhao port; shipments commonly use Aframax vessels with ~740,000 barrel capacity.
Risks and uncertainties
- Ongoing geopolitical tensions - Continued disruption linked to the Iran war may further affect Middle Eastern crude flows and prompt additional shifts in sourcing, impacting refiners and crude markets.
- Sanctions and counterparties - The refiner has avoided sanctioned counterparties in recent ESPO deals, but the treatment of intermediated trades remains an area of market scrutiny for trading and compliance teams across the sector.
- Import volatility - Sharp declines in China’s overall crude imports create uncertainty for feedstock planning at refiners and for global crude demand forecasts, affecting oil trading and shipping sectors.