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China is lapping up Russian oil at steep discounts offered by suppliers facing Western sanctions, even as global energy prices are hovering at a record. Beijing imported a record 8.42 million tonnes of Russian crude oil in May, a 29% increase compared to April, and a 55% jump over May 2021.
The Russian invasion of Ukraine has impacted global energy supply chains and Western countries are changing their suppliers in a bid to isolate Moscow. The United States, Canada, and the European Union have imposed a ban on Russian crude imports. However, Russian oil is now being sourced by China and India at a heavy discount.
Russian oil flows into Asia
In May, Russia overtook Saudi Arabia as China’s biggest oil supplier. Companies such as state-owned Sinopec and Zhenhua Oil have increased purchases of Russian oil.
“Russia’s seaborne shipments of crude oil to China rose for the fourth consecutive month in May to 1 million barrels per day, and arrivals in June will continue,” Yen Ling Song, an associate director at S&P Global Market Intelligence, told SCMP.
China’s overall crude oil imports rose 11.8% in May compared to last year, as the country slowly reopens from its worst wave of Covid-19 yet and demand increases. Beijing has also ramped up imports of other materials and sourced 4.7 million tonnes of Russian coal, 24% higher over April, but 5% lower compared to last year.
Additionally, Chinese coal traders are likely to favour Russian coal thanks to its slight price advantage over domestic coal, a report by Chinese coal information provider sxcoal.com said.
China’s customs department said imports from Russia have increased by 79.6% to $10.3 bn in May, with crude oil making up 70% of these imports.
Russia is one of the key suppliers of crude oil, and exports have been falling since the country started the war in Ukraine. Meanwhile, China is also importing oil from Iran, despite the sanction imposed by the US. Iranian oil makes up roughly 7% of China’s oil imports.
While most countries are isolating Moscow, China’s continued support for Russia is likely to lower investor appetite. Previously, Chinese President Xi Jinping in a call with Vladimir Putin reiterated support for Russia’s security concerns.
