Sinopec extends bumper Russian oil buys, squeezing teapots, traders say

China Petroleum and Chemical

02/09/2026 11:36

China's biggest refiner extends strong buying into October on improved margins
Trading of October ESPO programme completed way ahead of normal cycle, traders say 
August imports estimated at just over 400,000 bpd, Vortexa says
Independent refiners face scarce Iranian oil, higher-priced alternatives
By Chen Aizhu, Siyi Liu and Florence Tan
SINGAPORE, Sept 2 (Reuters) - China's Sinopec Corp is extending its Russian oil buying binge as it locks in higher refining margins, squeezing supplies for smaller independent refiners that face dwindling Iranian shipments due to the U.S. naval blockade, trading sources said. 
Buying Russian oil, cheaper than rival grades from the Middle East, Brazil or West Africa, enables the world's biggest refiner to capture improved domestic processing profits and boost lucrative fuel exports after China eased restrictions on shipments.  
Reuters reported last month that Sinopec, which had suspended purchases from Russia last October, had ramped up buying for July to September delivery to offset war-diminished Middle Eastern supply.
Its buying has continued or even accelerated for October, mostly of Russia's flagship Far East export grade ESPO blend, but also of smaller volumes of Sokol from Sakhalin Island and Urals loaded from Russia's European ports, traders say.
Sinopec has agreed to buy between 10 and 15 shipments of ESPO, or about 235,000 to 353,000 barrels per day, according to estimates by seven traders close to ESPO trade. Its total October purchases, including Sokol and Urals, could exceed 20 shipments, three of them estimated.
"Sinopec continues to snap up Russian oil to offset part of its supply losses from the Middle East," said Sun Jianan, an analyst with consultancy Energy Aspects.
"Such buying has driven prices sharply higher and squeezed supply for independent refiners," he said.
Sinopec did not immediately reply to a request for comment.

SCRAMBLE FOR BARRELS
Independent refiners, also known as teapots, favour ESPO for its short shipping distance, supply reliability and cheaper prices in recent years due to Western sanctions on Moscow over its invasion of Ukraine.
With Iranian barrels growing scarce and ESPO snapped up by Sinopec, teapots are being forced to buy pricier alternatives, pinching margins. 
Sinopec's buying triggered a scramble for October ESPO shipments, with deal discussions closed around mid-August, nearly a month earlier than usual, multiple trading sources said. 
November ESPO shipments also began trading this week, with premiums surging to $10 per barrel offered to teapots on a delivered basis, two traders said.
Based on ship tracking data, Vortexa Analytics estimated Sinopec's August imports of Far Eastern Russian oil — mostly ESPO but also Sokol — at just over 400,000 barrels per day, equivalent to 9% of Sinopec's average throughput during the first half of 2026. 
Sinopec last week told an earnings briefing that it will increase sourcing of oil from Brazil, Africa and elsewhere, but did not mention Russia.  

RISING PREMIUMS
Meanwhile, Iranian oil — the top import source for teapots — is becoming scarce as shipments have stalled after the U.S. resumed a naval blockade in mid-July.
Several traders said market talk this week of September-delivery Iranian Light was for premiums of $6 over benchmark Brent, with no deals heard. That compared with $2 premiums two weeks ago. Iranian oil typically trades at discounts.       
"Prices are getting too high for teapots, (it's) very difficult to place new orders," said a trading manager with an independent refiner.  
Some teapots have secured costlier Brazilian, Canadian and Iraqi shipments instead.
A deal for Iraqi Basrah Medium was done last week at close to $8 a barrel above Brent for September delivery into China, with fresh offers at above $8 premiums, said one trader involved in the business. 
"Teapots would be losing money at these prices, so most of them decided to hold out and wait," said the trader. 
Plants whose inventories are running low may be forced to trim runs.
"The question is how much higher refiners are willing, or able, to pay before cutting runs becomes the more economical option," Kpler analyst Muyu Xu wrote in a LinkedIn note on Wednesday.  
Energy Aspects' Sun said: "With inventories expected to last only until late September or early October, the teapots may have to cut refinery runs if the situation persists."

 (Reporting by Chen Aizhu, Florence Tan and Siyi Liu; Additional reporting by Trixie Yap; Editing by Jan Harvey)
 ((aizhu.chen@thomsonreuters.com))