Chinese independent refineries’ wave of Sokol crude imports to ebb in April, May as prices rise

China’s independent refineries are expected to slash their Russian Sokol crude imports in April-May by about 70% from record arrivals in March due to rising prices, refinery and trade sources told S&P Global Commodity Insights April 8.

The independent refineries received 13 cargoes of Sokol in March, totaling 1.26 million mt (298,000 b/d), via the ports in Shandong province and Tianjin city, S&P Global data showed. The volume surged 327% from 295,000 mt received in February.

However, the inflows are likely to fall to three-four cargoes totaling about 600,000 mt to the independent sector in April, trade sources said.

Shipping data from S&P Global Commodities at Sea showed only around six Sokol cargoes expected to arrive in China in April.

“There were not many offers for Sokol in the market, probably due to sanctions-related issues in shipping and payments discouraging buying interest,” said an independent refinery source.

Some of the March-arrived cargoes were loaded via sanctioned vessels, so it took quite a long time for those to be discharged as banks had been cautious about facilitating payments to Russia-related commodities, S&P Global reported earlier.

More importantly, rising prices have dampened demand for Sokol crudes, refinery sources said.

May delivery Sokol cargoes were offered at a price of flat to ICE Brent crude futures on a DES Shandong basis, rising from a discount of around 50 cents/b on the same basis through most of March when the arrivals jumped, sources said.

March arrivals

Some of the March Sokol cargoes were diverted from South Korean waters as Indian buyers were not taking them, leaving many shipments floating for a long time before finding buyers in China.

On top of those Sokol cargoes bound for independent refineries, China’s state-owned oil companies also imported Sokol in March, with at least six cargoes discharged for PetroChina and CNOOC refineries, totaling 600,000 mt, according to S&P Global data.

The higher imports of Sokol crudes have pushed up overall feedstock imports from Russia, including crudes and fuel oil, to a nine-month high of 4.84 million mt in March. The last high was 5.56 million mt in June 2023, S&P Global data showed.

Besides Sokol, Russian ESPO imports for the sector also reached a nine-month high of 2.6 million mt in March, up 30% from February. The previous high was 2.9 million mt in June 2023, S&P Global data showed.

ESPO, which was offered at flat to a premium of 20 cents/b over the ICE Brent futures on DES basis, was not seeing much trading for May cargoes yet, sources said.

Meanwhile, there were still a few April cargoes left in the market for sale as of early April, probably due to sanctions-related issues, sources added.
Source: Platts