A recent landmark meeting between leaders Donald Trump and Xi Jinping has added to the confusion in the global oil market. While the talks established new ground rules for trade in semiconductors and soybeans, the pressing issue of Russian oil was notably absent from public readouts, leaving Chinese refiners guessing.
This uncertainty comes at a critical time. China’s state-owned refiners, Sinopec and PetroChina, are already canceling Russian oil cargoes. They are reacting to new US sanctions against Moscow’s energy giants, Rosneft and Lukoil, fearing penalties by association.
Smaller private “teapot” refiners are also in retreat. The blacklisting of Shandong Yulong Petrochemical Co. by the UK and EU has sent a shockwave through the sector, with many halting Russian purchases to avoid a similar fate. This combined pullback has hit Russia hard, crashing prices for its ESPO crude.
Russia had previously grown to become China’s biggest oil supplier by selling its crude at a steep discount after the Ukraine war. Now, a “buyers’ strike” estimated at 400,000 barrels a day—up to 45% of China’s Russian imports—threatens that relationship. The West is deliberately ratcheting up pressure to cut off Moscow’s war funding.
The situation is deeply muddled. The blacklisted Yulong, for instance, is now buying more Russian oil because it has no other options. Meanwhile, other teapots are constrained not only by fear but also by a domestic shortage of crude import quotas. The lack of clarity from the Trump-Xi summit only complicates their calculations further.