China Cuts Russian Oil Purchases By One Third Following Putin's Trip To Xi Jinping

Chinese refineries have replaced Russian oil with barrels from the Middle East.

Russian oil companies have faced a sharp decline in demand for their barrels from their main buyer - China. At the end of July, oil supplies from Russia to China fell by 7.4 per cent year-on-year and their total volume - 1.76 million barrels per day - was the lowest since at least the end of last year, according to Chinese customs statistics, The Moscow Times reported.

The decline in Chinese imports began at the end of the first quarter and accelerated after Russian President Vladimir Putin visited Beijing in May. If in March oil producers sold 2.55 million barrels per day to China, then by June the volume dropped to 2.05 million barrels per day, and in July it was 1.9 million. Thus, in 4 months oil supplies to China fell by 30%, and since the beginning of the year - by 22% (in December it was 2.25 million barrels per day).

Chinese refineries replaced Russian oil with barrels from the Middle East, notes Reuters: supplies from Saudi Arabia in July rose by 13% year-on-year to 1.51 million barrels per day. In addition, imports from Malaysia, which is the main hub for oil transit from the sub-sanctioned countries of Iran and Venezuela, soared 61% to 1.46 million bpd.

China remains the largest buyer of Russian oil, taking 43 per cent of all barrels that oil producers export abroad, CREA experts said. Oil accounts for nearly two-thirds of all the goods Russia supplies to China, while raw materials account for more than 90 per cent.

The sagging Chinese demand has dropped the economy's revenues: in July, they fell to an annual low of 656 million euros a day, according to CREA estimates. Oil export revenues sagged by 5% relative to June, to €219m a day, while physical shipments fell by 9%.

China's total oil imports in July were the lowest since September 2022, Reuters notes. Fuel demand in the world's second-largest economy is falling as its growth rate slows, Economist Intelligence Unit analyst Matthew Sherwood said. ‘The sharp decline is linked to weak activity in manufacturing and construction,’ and the same is true for purchases of other raw materials, he points out.

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