China's crude imports from Russia set to rise further after April increase: sources

China's crude imports from Russia recovered further in April to 1.6 million b/d, or 6.55 million mt, and the trend is expected to continue amid deep discounts, market sources told S&P Global Commodity Insights on May 20.

Imports from Russia rose 6% from 1.51 million b/d in March, when it rebounded from a the nine-month-low of 1.42 million b/d in February, data from General Administration of Customs showed May 20.

This helped to narrow the year-on-year decline in Russian crude imports to 7.4% in January-April from 10.8% in the first quarter. China imported an average of 1.56 million b/d in the first four months of the year.

Inflows had been under pressure from slow throughput demand and uncertainties in shipping and payments amid Russia's war in Ukraine.

However, Sinopec returned to the spot market in late March to take deep-discounted Russian Urals for June delivery, followed by its state-owned peers, while an increasing number of independent refiners are now willing to buy the crude and ESPO to boost their refining margins, according to market sources.

ESPO is currently being offered at a discount of around $3-5/b against ICE Brent Futures for June-July loading cargoes on a DES Shandong basis, while Urals deals were done at ICE Brent minus about $8/b, trading source said.

These Russian cargoes became attractive as some alternative West African barrels were offered at ICE Brent plus $5-6/b for July-loading cargoes on the same basis without any deals concluded.

China's appetite for African crude has fallen 17.4% year on year to 1.24 million b/d and imports from Latin America dropped 26.9% to 782,000 b/d in January-April, GAC data showed.

Inflows from Saudi Arabia set to fall

In comparison, crude imports from top supplier Saudi Arabia are likely to fall from a record high of 2.18 million b/d or 8.93 million mt in April as state-owned refineries prefer to consume their stocks before bringing in more barrels, trading sources said.

The previous high from the kingdom was 2.17 million b/d in May 2020, GAC data showed.

State-owned refineries contributed most to the 38.1% year-on-year surge as they had less maintenance scheduled than in the same period of last year, while domestic demand had initially been expected to recover from the first quarter, and Beijing called for ensuring domestic supplies amid high oil prices.

These refineries are the main buyers of Saudi crudes via term contracts.

Adding to heavier crude imports from Kuwait and the UAE, which also registered strong year-on-year growths at 35.3% and 66.6%, respectively, the market share of Middle Eastern producers reached 54.3% in April from 49.9% in March and 54.3% in April 2021, GAC data showed.

However, tight movement controls due to COVID-19 forced Chinese refineries to cut throughput to a two-year low of 12.66 million b/d and pushed up China's crude inventories to a 10-month high of 932.16 million b/d, data from National Bureau of Statistics and Kpler showed.

"We expected China's throughput would rebound by about 500,000 b/d in May, but the increase is unlikely to cap the rising crude stocks," a Beijing-based analyst said.

As a result, state-run refiners cut nominations for Aramco's June term crude volumes, according to traders in Singapore.

China's top crude suppliers ('000 mt)

Source: General Administration of Customs