Chinese refiners, in particular state companies, have stepped in to buy Russian Urals crude as Indian buyers retreat, fearing a 25% retaliatory US secondary tariff on all Indian goods if they continue purchasing Russian crude.

The US has threatened China with a similar additional 25% import tariff if it continues to buy Russian oil. But Beijing officials have ignored the threat, saying China opposes the “abuse of tariffs” and that it will “continue to take energy supply measures that are right for China based on our national interests.”

“We heard the SOEs [state-owned enterprises] are increasing Urals imports,” a Chinese oil analyst told Energy Intelligence.

While unconfirmed, a number of traders and analysts told Energy Intelligence that they had heard of several Urals cargoes heading to China.

“I heard the rumors; it is not confirmed. But it is logical for the Chinese to step in,” a Chinese trader told Energy Intelligence.

Chinese buyers have purchased at least 11 million barrels of Urals crude since July 2024, S&P Global Commodity Insights reported on Thursday. There is also market talk that Chinese companies have bought 15 million bbl of Urals for arrival in September to November, an analyst told Energy Intelligence.

China is the largest buyer of Russian crude, taking in 1.99 million barrels per day in the first half of this year, according to Chinese customs data. India is close behind at around 1.7 million b/d, data from shipping analytics firm Kpler shows. Typically, Chinese buyers take more of Russia’s light, slightly sour East Siberia-Pacific Ocean (Espo) export blend, while Indian refiners buy most of the Urals.

But Indian buyers appear to have reduced Urals purchases for September delivery and beyond, creating an opening for Chinese buyers to purchase the grade at a weaker differential. That’s after US President Donald Trump threatened to apply a 25% secondary tariff on all of India’s exports to the US from Aug. 27 on top of the current 25% rate Indian exporters already face.

Big Chinese State Buyers

China imported on average 1.5 million bbl of Urals per month from January to July, Kpler data shows.

Deliveries of 15 million bbl over the September-November period would imply that Chinese buyers are more than tripling their monthly Urals imports over that period, most likely triggered by attractive pricing.

Sinopec and PetroChina are said by some traders to have bought several Urals cargoes, but it is unclear whether China National Offshore Oil Corp. has bought cargoes, too. Small Chinese refiners, also known as teapots, usually prefer Espo crude and would only buy Urals if it were heavily discounted and cheaper than Iranian crude, traders say.

Yulong Petrochemical, which bought Urals and Espo for trial runs at its 400,000 b/d refinery last year, is said to have purchased Urals this time, but this could not be confirmed.

Urals crude should now be worth less than a $1.50 per barrel premium over ICE Brent delivered to China, an oil analyst told Energy Intelligence. Some of the deals concluded earlier this month were done at around a $2 premium to ICE Brent, S&P Global reported.

Eyes on Trump-Putin Summit

Crude trading slowed on Friday as the market turned its attention to the upcoming Trump-Putin meeting in Alaska.

President Trump on Thursday hinted again at slapping higher tariffs on China if its refiners do not stop buying Russian crude.

Asked if his threat of taking harsh economic action against Russia influenced President Vladimir Putin’s decision to agree to the meeting, Trump said “everything has an impact.”

“Certainly, when you lose your second-largest customer and you’re probably going to lose your first-largest customer, I think that probably has a role,” Trump said.

But some traders see little chance that China will be swayed by Trump’s threats.

“China and the US have decided to suspend the implementation of the [additional] 24% tariff for another 90 days starting from August 12,” a trader said. “Who would still take Trump’s threat of secondary tariffs seriously? China will increase crude imports from Russia.”

President Putin spoke to Chinese President Xi Jinping this week to brief him on Ukraine and the recent communication with the US. “The two heads of state spoke highly of the high-level political mutual trust and strategic coordination between China and Russia, and agreed to work together to advance the greater development of bilateral relations,” according to the official Chinese read-out of the phone call, underlining Beijing’s continued support for Moscow.