In a significant shift, Russia has overtaken Saudi Arabia to become China’s leading crude oil supplier in the past year, as the world’s largest crude importer strategically procures vast quantities of discounted Russian oil, despite Western sanctions.
According to Reuters, Chinese customs data reveals that Russia shipped a record 107.02 million metric tons of crude oil to China last year, equivalent to 2.14 million barrels per day (bpd). This surpasses other major oil exporters, including Saudi Arabia and Iraq.
The data indicates a notable 1.8% decline in crude oil imports from Saudi Arabia, previously China’s primary supplier, which totaled 85.96 million tons. The Middle East oil giant experienced a loss of market share to Russian crude, which offered more competitive pricing in the global market.
Russian crude, facing reduced demand from international buyers due to sanctions imposed over its 2022 invasion of Ukraine, traded at significant discounts compared to international benchmarks.
Despite the challenges posed by sanctions, Chinese and Indian refiners exhibited an increased appetite for discounted Russian oil, driving demand and contributing to the rise in ESPO crude prices through 2023. The pricing dynamics saw Russian ESPO crude surpass the Group of Seven’s $60 per barrel price cap imposed in December 2022.
To maintain price stability, both Saudi Arabia and Russia, two of the world’s top three oil producers, announced output and export cuts in the past year. Saudi Arabia extended output cuts by 1 million bpd in the current quarter, while Russia deepened its export cut from 300,000 bpd to 500,000 bpd for the year.
Chinese refiners adopted strategic measures to handle shipping and insurance for Russian crude, effectively circumventing Western sanctions. Utilizing intermediary traders and trans-shipment points, such as those off the waters of Malaysia, Chinese importers successfully navigated challenges related to sanctioned cargoes from countries like Iran and Venezuela.
China’s overall crude imports for the year reached a record 563.99 million metric tons, equivalent to 11.28 million bpd, reinforcing its position as the world’s top crude oil importer.
