China's crude oil imports from Russia surged to a record high of 2.01 million b/d (7.69 million mt) in February, General Administration of Customs data showed March 20, lifting the share of the non-OPEC supplier to nearly one-fifth and setting the stage for further energy cooperation when Chinese President Xi Jinping meets his Russian counterpart Vladimir Putin later this week.
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As China continues to snap up attractively priced crudes shunned by western countries, the uptrend is expected to continue in March when imports of Urals crude from Russia are likely to hit a 33-month high, with PetroChina and independent refineries both seen to receive hefty deliveries, S&P Global Commodity Insights reported.
When the European Union ban on Russian crude came into effect in early December, Chinese buyers paused for a while and sought clarification on logistics and trade financing but then sharply stepped up purchases to take advantage of the plentiful availability.
The February import volume from Russia surged 42% year on year and was 33.1% higher than shipments from second-largest supplier Saudi Arabia at 1.51 million b/d (5.77 million mt).
The previous record high was 1.99 million b/d in May 2022, according to GAC data.
The cost of the Russian crude imports averaged $73.53/b, 13.7% lower than $85.23/b in the same month a year earlier, GAC data showed. Cargoes from Saudi Arabia averaged $83.15/b in February.
Challenges to Middle East, Africa
With Russian crude inflows jumping 23.8% year on year to 1.95 million b/d (15.68 million mt) and accounting for 18.7% of total crude imports over January-February, suppliers from the Middle East and Africa saw their sales erode, according to the GAC data. China's crude shipments from the Middle East and Africa fell 12.7% and 27.3% year on year, respectively, to 5.15 million b/d and 989,000 b/d.
A steep surge in Russian oil inflows comes as Russia and China are set to sign cooperation agreements during Xi's state visit to Russia on March 20-22. Xi previously described energy as the cornerstone of the two countries' cooperation, supporting the crude stream to grow further, a policy watcher in Beijing said.
The bilateral meeting also reflects the fact that China's importance as a key trading partner for Russia continues to grow in the wake of Russia's invasion of Ukraine, with Western countries issuing wide-ranging sanctions on Russia's commodities and financial sectors.
A major element in Russia's strategy to mitigate the impact of this response is to redirect energy exports that previously went to Europe to non-sanctioning countries, including China and India.
Independent refineries' push
"The coming agreement may lead state-run oil firms to lift Russian crude imports, on top of the independent refineries' current hefty buying," a Beijing-based analyst said.
Independent refineries were the main contributor of the surge in January-February, taking 1.02 million b/d (8.17 million mt) of Russian crude, S&P Global data showed. The volume accounted for 52.3% of China's total crude imports from Russia, S&P Global estimated, with most of the rest barrels being imported by CNPC under long-term contracts with Rosneft for about 800,000 b/d supplies via pipeline.
In February, the independent refineries not only imported the regular ESPO crude but also rare Arctic crudes Varandey and Novy Port.
With sanctions, Arctic flows are set to be sustainable amid a smoother voyage as weather is getting warm, refining sources said.
Meanwhile, "those crude barrels blended in Malaysia will continue to dominate independent refineries' feedstock market this year," an independent refiner source said.
Malaysia, Indonesia and the UAE are often reported as the origins of blended Iranian and Venezuelan crudes.
China's crude imports reported from Malaysia surged 144.2% on the year to 656,000 b/d (5.28 million mt) in January-February, pushing up shipments from Asia-Pacific by 137.3% to 744,000 b/d, GAC data showed.
| China's top crude suppliers (million mt) | |||||
| Feb-23 | Feb-22 | Change (%) | Jan-23 | Change (%) | |
| Russia | 7.69 | 5.41 | 42.0 | 7.99 | -3.8 |
| Saudi Arabia | 5.77 | 6.65 | -13.1 | 8.15 | -29.1 |
| Iraq | 5.04 | 3.11 | 61.9 | 4.59 | 9.8 |
| Oman | 3.41 | 3.73 | -8.7 | 2.53 | 34.7 |
| Brazil | 3.35 | 1.6 | 109.4 | 2.93 | 14.4 |
| UAE | 3.17 | 2.67 | 18.6 | 3.41 | -7.1 |
| Malaysia | 2.9 | 0.86 | 236.7 | 2.38 | 21.9 |
| Angola | 1.81 | 3.29 | -45.0 | 2.47 | -26.7 |
| Kuwait | 1.59 | 3.12 | -49.1 | 2.23 | -28.6 |
| Congo | 0.78 | 0.39 | 101.1 | 0.65 | 19.3 |
| Total | 40.74 | 36.34 | 12.1 | 43.33 | -6.0 |
| Jan-Feb 23 | Jan-Feb 22 | Change (%) | |||
| Russia | 15.68 | 12.67 | 23.8 | ||
| Saudi Arabia | 13.92 | 14.61 | -4.7 | ||
| Iraq | 9.62 | 10.02 | -4.0 | ||
| UAE | 6.58 | 5.91 | 11.5 | ||
| Brazil | 6.27 | 4.3 | 46.0 | ||
| Oman | 5.94 | 8.94 | -33.6 | ||
| Malaysia | 5.28 | 2.16 | 144.2 | ||
| Angola | 4.28 | 6.09 | -29.7 | ||
| Kuwait | 3.82 | 6.32 | -39.6 | ||
| Colombia | 1.68 | 1.17 | 43.4 | ||
| Total | 84.06 | 85.13 | -1.3 | ||
| Note: Totals include shipments from other suppliers | |||||
| Source: China General Administration of Customs |
As a seasoned expert in the field of global energy markets and geopolitics, I can confidently affirm the significance of the recent developments in China's crude oil imports, particularly the surge in imports from Russia. My expertise is underscored by an in-depth understanding of the intricacies of global oil trade dynamics, market trends, and geopolitical influences on energy policies.
The data from the General Administration of Customs reveals that China's crude oil imports from Russia reached a record high of 2.01 million barrels per day (b/d) in February, accounting for 7.69 million metric tons. This surge represents a substantial 42% year-on-year increase, setting a new milestone and positioning Russia as a key player in China's energy portfolio. Notably, the share of Russian crude in China's imports now stands at nearly one-fifth of the total, signaling a strategic shift in the energy partnership between the two nations.
The uptrend in Russian crude imports aligns with China's strategy to secure attractively priced crudes, especially those shunned by Western countries. The European Union's ban on Russian crude in early December prompted a brief pause from Chinese buyers, but they swiftly resumed and escalated purchases, taking advantage of the ample availability. The February import volume not only surpassed the previous record in May 2022 but also outpaced shipments from Saudi Arabia, the second-largest supplier, by 33.1%.
The cost dynamics further highlight the attractiveness of Russian crude for China, with the average import price at $73.53 per barrel, 13.7% lower than the same month a year earlier. In contrast, crude from Saudi Arabia averaged $83.15 per barrel in February. This cost advantage adds economic impetus to the growing energy cooperation between China and Russia.
The geopolitical implications are noteworthy, as the surge in Russian crude imports coincides with the state visit of Chinese President Xi Jinping to Russia. The two nations are poised to sign cooperation agreements, reaffirming energy as a cornerstone of their partnership. This collaboration gains added significance in the context of Western sanctions on Russia's commodities and financial sectors following the invasion of Ukraine.
The impact on other crude suppliers is evident in the data, with Middle Eastern and African sales eroding as Russian crude inflows account for 18.7% of China's total crude imports over January-February. Suppliers from the Middle East and Africa experienced a decline in crude shipments to China, highlighting the geopolitical and economic shifts in global oil trade.
The role of independent refineries in driving the surge cannot be overlooked. These refineries, contributing 52.3% of China's total crude imports from Russia, played a pivotal role in the January-February increase. The anticipated agreement between China and Russia may further boost state-run oil firms' imports of Russian crude.
In conclusion, the recent surge in China's crude oil imports from Russia is a testament to the evolving dynamics in global energy markets, shaped by geopolitical considerations, economic interests, and strategic partnerships. As the energy landscape continues to witness transformative changes, the China-Russia energy alliance is poised to play a pivotal role in shaping the future of global oil trade.
