China’s “teapot” refiners are being squeezed from two directions. They are terrified of Western sanctions, and they are running low on crude import quotas for the year.
The fear stems from the UK/EU blacklisting of Yulong Petrochemical, which has caused them to shun Russian crude. This adds to the “buyers’ strike” by state firms like Sinopec, which are reacting to US sanctions on Rosneft and Lukoil.
This retreat has hit Moscow hard, causing ESPO crude prices to dive and impacting 400,000 barrels a day.
The market is also dealing with the fallout of a “muddled” Trump-Xi summit, which was silent on the oil issue.
This combination of political uncertainty, sanctions, and domestic quota limits has thrown the world’s top importer into a state of confusion.