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

• Sinopec purchased 10-15 ESPO shipments for October (235,000-353,000 bpd), with total Russian oil imports in August estimated at over 400,000 bpd, representing 9% of its refinery throughput
• October ESPO trading closed by mid-August, nearly a month early, with November premiums surging to $10 per barrel as Sinopec's demand squeezed available supply
• Independent refiners face Iranian oil premiums at $6 over Brent (versus typical discounts) and Iraqi Basrah Medium near $8 above Brent, prices at which most teapots would lose money and may cut runs by late September

Summary: Sinopec Extends Russian Oil Purchases, Squeezing Independent Refiners

Key Development:

China's Sinopec Corp is aggressively expanding its Russian oil purchases through October 2026, capitalizing on improved refining margins while squeezing smaller independent refiners ("teapots") facing supply shortages.

Key Figures:

• Sinopec purchased 10-15 ESPO shipments for October delivery, equaling 235,000-353,000 bpd
• Total October purchases could exceed 20 shipments including Sokol and Urals grades
• August Russian oil imports estimated at 400,000+ bpd, representing 9% of Sinopec's H1 2026 throughput
• Trading for October ESPO closed mid-August, nearly one month earlier than normal

Market Drivers:

Sinopec resumed Russian purchases (suspended last October) to offset Middle Eastern supply disruptions and leverage cheaper Russian grades versus alternatives from Brazil, West Africa, and the Middle East. The state-owned refiner is also benefiting from China's eased export restrictions on fuel products.

Market Impact:

• November ESPO premiums surged to $10/barrel offered basis
• Iranian Light premiums jumped from $2 to $6 over Brent (typically trades at discounts)
• Iraqi Basrah Medium traded near $8 above Brent for September delivery
• Independent refiners face margin compression and potential run cuts

Critical Constraint:

Iranian oil supplies—the primary source for teapots—have stalled since mid-July due to resumed U.S. naval blockade, forcing independent refiners toward costlier Brazilian, Canadian, and Iraqi alternatives or face production cuts by late September/early October as inventories deplete.

Analyst Outlook:

Energy Aspects warns teapots may cut refinery runs if elevated prices persist beyond their inventory timelines.