CHINESE REFINERIES DEPENDING ON RUSSIAN OIL ARE PREPARING TO CLOSE

Oil refineries in Asia have started to reduce production volumes and some are even preparing to close. The reason for the pessimism was the latest package of US sanctions against Russian oil, which significantly affected its supplies to the world market.

The hardest hit were small independent Chinese enterprises, the so-called “samovars”, which depended on cheap resources from Russia and did not fear sanctions when purchasing. As a rule, such refineries have inefficient production and can compete with market leaders only thanks to discounts on oil.

Experts point out that these plants have already reduced processing by 10-20% and that the situation could worsen in February. UAE and Omani oil, which can replace Russian oil, is more expensive than the Far Eastern ESPO, beloved by samovars, while the surge in freight rates for tankers only exacerbates the situation.

Traders say that some Asian plants have started operating at a loss and have even stopped buying on the spot market to avoid going bankrupt. Thus, in Singapore (the benchmark for Asia), oil refining yields have fallen from $3.75 per barrel at the beginning of the month to minus $0.65 this week.

Earlier, it was reported that after several tankers involved in the supply of Russian oil from the Far East failed to enter the ports of destination due to sanctions, ships that had not previously operated in this direction also joined the transport. At the same time, the total weekly volume of seaborne exports has fallen sharply. Based on current trends, seaborne shipments will soon fall to the lowest level in 16 months.