China sharply increased purchases of Russian Sokol oil

By Rhod Mackenzie

Chinese oil refiners have replaced their Indian counterparts, who reduced purchases of Russian Sokol oil due to fear of American sanctions. In February, Chinese oil refiners, mostly private owners, purchased an average of 168 thousand barrels of Sokol daily, three times more than in January. Last year, Chinese oil refineries bought an average of 53 thousand barrels of Sokol oil produced on Sakhalin every day.

In February, Indians have also started purchasing almost 119 thousand barrels per day. However, only one company, Hindustan Petroleum Corp. Limited (HPCL.), has resumed purchases so far. According to Reuters, HPCL is planning to pay for it in UAE dirhams. HPCL is currently buying significantly less than last year, which was 140 thousand barrels per day. In December last year and January 2024, the Indians did not purchase Sokol due to the fear of being subjected to secondary US sanctions against Russian oil. Additionally, there were occasional issues with payment and discounts. Last year, Delhi advised its businessmen not to pay for Russian oil in yuan. It is worth noting that India and China have had tense relations for many years, and armed conflicts have arisen several times on the border in the Himalayas.

In January, Indian Oil Minister Hardeep Singh Puri mentioned low discounts, according to the Indian side. China and India are currently the primary buyers of Russian oil, including the Sokol and ESPO brands. Market participants report that Chinese refineries are purchasing Russian oil in February at a discount of around 50 cents per barrel compared to Brent crude. Chinese refiners have shown interest in Sokol, despite it not being their primary brand. The attraction lies in its higher discount compared to the ESPO brand, which is their main source of oil. The attraction lies in its higher discount compared to the ESPO brand, which is their main source of oil.