By Chen Aizhu and Florence Tan SINGAPORE, March 17 (Reuters) - Chinese state oil majors looking to head off supply shortages caused by the war in the Middle East have resumed seeking Russian crude
China’s Oil Majors Seek Russian Crude Amid Supply Fears and Sanctions Waiver
Chinese State Oil Majors Resume Russian Crude Purchases
By Chen Aizhu and Florence Tan
Supply Shortages and Sanctions Waiver Drive Renewed Interest
SINGAPORE, March 17 (Reuters) - Chinese state oil majors looking to head off supply shortages caused by the war in the Middle East have resumed seeking Russian crude cargoes after a four-month hiatus, taking advantage of a U.S. sanctions waiver, five trade sources said.
Trading arms under state-run Sinopec and PetroChina have this week made inquiries with suppliers for possible purchases of Russian oil, which would be their first since November, said five sources close to or involved in Russian oil trade.
Imminent Transactions and Price Advantages
While no deals were known to have been struck as of Tuesday, two of the sources said transactions were likely to be imminent as Russian oil remains cheap versus rival supplies from Brazil and West Africa despite surging prices and premiums triggered by the U.S.-Israel war on Iran that began on February 28.
Chinese oil majors were "assessing" the situation, said a state oil trader, including whether payment and delivery could be completed within the 30-day waiver window that began on March 12 and applies to cargoes that had already been loaded.
Sinopec and PetroChina did not immediately respond to requests for comment.
Alternative Sourcing Strategies
One of the sources, involved in Russian oil trading and familiar with PetroChina's trading operations, said majors could also seek to secure cargoes while the situation is "messy" by buying from Chinese independent refiners or traders with Russian-origin oil already in storage.
Role of Independent Refiners ("Teapots")
"Some teapots are ready to resell, as that makes more money for them than processing at their plants," said the source, referring to the independent refiners.
End-April arriving ESPO blend, Russia's flagship Far East export grade, was last heard offered by a Russian producer at $8 a barrel above July ICE Brent on delivered basis.
That compared with April-loading Brazil's Tupi grade last pegged at a premium of $12-15 premium over dated Brent.
Market Dynamics and Pricing Trends
From Discount to Premium
FROM DISCOUNT TO PREMIUM
Differentials for ESPO, mostly consumed by China's independent refiners, flipped into a $2-$3 premium last week for April/May shipments, compared with discounts of $7-$10 for March-loading barrels.
China's seaborne Russian oil imports surged to an all-time high of 1.92 million barrels per day in February, Kpler data showed, as independent buyers snapped up deeply discounted cargoes after top buyer India's demand fell.
Impact of U.S. Sanctions and Price Spikes
State oil companies had since late October suspended buying Russian oil after Washington imposed sanctions on Moscow's two biggest oil companies, Rosneft and Lukoil.
The spikes in spot premiums and outright Brent prices to more than $100 a barrel, would however sideline independent refiners, said three of the sources, as they are cushioned for the near term with cheaper inventories of Russian and Iranian oil bought before the war.
Reporting Credits
(Reporting by Chen Aizhu, Florence Tan; Additional Reporting by Siyi Liu,Editing by Tony Munroe and Raju Gopalakrishnan)
