China’s “Teapot” Refiners Hamstrung by Quota Limits

A domestic issue is complicating China’s oil market as many “teapot” refiners are running low on crude import quotas. This problem will severely limit their ability to buy any foreign oil for the rest of the year, regardless of sanctions.
This limitation comes at a time of maximum uncertainty. A recent summit between Donald Trump and Xi Jinping provided no clarity on the future of Russian oil trade, leaving the market in a “muddle.”
Even if they had quotas, these private refiners are terrified of new sanctions. The UK/EU blacklisting of Yulong Petrochemical has served as a powerful warning, causing them to shun Russian crude.
State-owned firms are also in retreat. Sinopec and PetroChina are canceling Russian cargoes in response to new US sanctions on producers Rosneft and Lukoil.
This combined “buyers’ strike,” driven by both sanctions fear and quota limits, has caused ESPO crude prices to plunge and impacted an estimated 400,000 barrels a day.