CHINA HAS REDUCED ITS RUSSIAN OIL IMPORTS BY TWO-THIRDS DUE TO US SANCTIONS.

Chinese oil refiners, both state-owned and private, have reduced their purchases of Russian oil from 500,000 to 800,000 barrels per day, equal to up to two-thirds of their usual import volume, following the imposition of US sanctions against Rosneft and Lukoil. Bloomberg reported on November 18, citing data from analyst firm Rystad Energy AS.

"The US sanctions against Rosneft and Lukoil could really be a game-changer," Vandana Hari, founder of Singapore-based analyst firm Vanda Insights, told the agency.

The main impact, it is argued, has been on supplies of ESPO crude oil, a type of Russian crude produced in fields in eastern Siberia and transported via the ESPO pipeline. It makes up the majority of Russian exports to China. Major state-owned companies have suspended purchases, while private refiners are facing import quota shortages and the risk of sanctions, Bloomberg reports.

The impact of sanctions on the Rizhao oil terminal, which handled about 10% of China's crude oil imports, has also been highlighted. This has also limited the flow of Iranian oil, which, according to the agency, has decreased by 200,000-400,000 barrels per day.

Analysts interviewed by Bloomberg note an unusually high level of anxiety in the market. ESPO crude is currently trading at a $4 per barrel discount to benchmark prices, significantly worse than the 50-cent discount at the end of October. However, experts suggest that the current decline in imports may be partly due to a seasonal shortage of quotas and that the situation could change after the quota review.

On October 22, the U.S. Treasury Department announced sanctions against the Russian oil companies Rosneft and Lukoil. On October 27, the company announced its intention to sell its foreign assets.

On October 30, LUKOIL's press office announced the approval of an agreement for the sale of 100% of its international subsidiary LUKOIL International GmbH to Gunvor. It was noted that final approval from the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) was required for the deal to be finalized, as well as other licenses and permits from the authorities of the other countries in which the company operates. Subsequently, on November 7, the company withdrew its offer to purchase LUKOIL's assets.

On November 14, Lukoil's website reported that negotiations for the sale of its international assets were underway with several potential buyers. The company is also in regular contact with the authorities of the regions in which it operates. On November 17, it was reported that Iraq had ruled out the possibility of purchasing Lukoil's assets.