The global oil market is fretting as a recent trade truce between Donald Trump and Xi Jinping failed to address the massive uncertainty around Russian oil. While the leaders found common ground on semiconductors and soybeans, their silence on energy sanctions has left Chinese refiners in a “muddle.”
This uncertainty is amplifying the chill from new sanctions. China’s state-owned giants, Sinopec and PetroChina, are already canceling Russian oil cargoes. They are reacting to US penalties on Russian firms Rosneft and Lukoil.
Private “teapot” refiners are also in retreat. The blacklisting of Shandong Yulong Petrochemical Co. by the UK and EU has served as a powerful warning, causing many to halt purchases. This collective pullback has hit Russian ESPO crude prices hard.
The scale of the disruption is vast, estimated by Rystad Energy AS at 400,000 barrels a day, or nearly half of China’s Russian imports. This is a clear attempt by the West to choke off Moscow’s oil revenues, which Russia had tried to protect by selling discounted crude to China.
As China, the world’s top importer, steps back, the US could benefit. But the lack of clarity from the Trump-Xi summit makes long-term planning difficult. Furthermore, teapots are also facing a shortage of import quotas, further complicating China’s energy outlook.