Sellers Cancel Deals with Chinese Oil Refiner Yulong After UK Sanctions
Several suppliers have canceled sales of Middle Eastern and Canadian oil to China’s Yulong Petrochemical following the UK's imposition of sanctions on the refiner, which may lead it to increase its Russian crude purchases.
SINGAPORE: Several suppliers have canceled sales of Middle Eastern and Canadian oil to China's Yulong Petrochemical after the UK imposed sanctions on the refiner.
These sanctions are likely to compel Yulong to purchase more Russian crude, according to multiple sources familiar with the deals.
The refiner, which has a capacity of 400,000 barrels per day and is among China's largest single customers for Russian oil, was designated by Britain last week as part of efforts to reduce Moscow's oil revenue used to fund the Ukraine war.
Suppliers that have unwound supply deals include European majors TotalEnergies and BP, trading house Trafigura, and Chinese state trader PetroChina International, among others.
Most of the cancellations apply to spot cargoes due for loading after November 13, when the sanctions take effect.
PetroChina International and TotalEnergies have exited transactions supplying Access Western Blend, a heavy crude exported from Canada, according to sources familiar with those transactions.
BP declined to comment.
Trafigura had been supplying Yulong with 2 million barrels per month of Omani and Abu Dhabi Upper Zakum crude under an annual contract, according to sources knowledgeable about the company's dealings with Yulong.
The decision to cancel contracts partly stems from concerns over the ability to make payments as large Western banks will avoid working with sanctioned entities.
With dwindling access to non-sanctioned crude supplies, Yulong is likely to buy more Russian oil, which already accounts for approximately half of its intake.
Yulong purchases between 150,000 and 250,000 barrels per day of Russian crude, according to estimates by traders and tanker tracker Vortexa.
Most of Yulong's Russian imports consist of ESPO Blend from Russia's Pacific coast, favored by Chinese refineries due to the short transit period for shipments.
Recently, Yulong has also imported Urals crude from Russia's European ports, as reported by three traders familiar with Yulong's procurement patterns.
Yulong Petrochemical is a joint venture between private aluminum firm Nanshan Group and government-backed Shandong Energy Group, built on a man-made island near the port of Yantai in northeastern Shandong province.
These sanctions are likely to compel Yulong to purchase more Russian crude, according to multiple sources familiar with the deals.
The refiner, which has a capacity of 400,000 barrels per day and is among China's largest single customers for Russian oil, was designated by Britain last week as part of efforts to reduce Moscow's oil revenue used to fund the Ukraine war.
Suppliers that have unwound supply deals include European majors TotalEnergies and BP, trading house Trafigura, and Chinese state trader PetroChina International, among others.
Most of the cancellations apply to spot cargoes due for loading after November 13, when the sanctions take effect.
PetroChina International and TotalEnergies have exited transactions supplying Access Western Blend, a heavy crude exported from Canada, according to sources familiar with those transactions.
BP declined to comment.
Trafigura had been supplying Yulong with 2 million barrels per month of Omani and Abu Dhabi Upper Zakum crude under an annual contract, according to sources knowledgeable about the company's dealings with Yulong.
The decision to cancel contracts partly stems from concerns over the ability to make payments as large Western banks will avoid working with sanctioned entities.
With dwindling access to non-sanctioned crude supplies, Yulong is likely to buy more Russian oil, which already accounts for approximately half of its intake.
Yulong purchases between 150,000 and 250,000 barrels per day of Russian crude, according to estimates by traders and tanker tracker Vortexa.
Most of Yulong's Russian imports consist of ESPO Blend from Russia's Pacific coast, favored by Chinese refineries due to the short transit period for shipments.
Recently, Yulong has also imported Urals crude from Russia's European ports, as reported by three traders familiar with Yulong's procurement patterns.
Yulong Petrochemical is a joint venture between private aluminum firm Nanshan Group and government-backed Shandong Energy Group, built on a man-made island near the port of Yantai in northeastern Shandong province.
