BEIJING (CAIXIN GLOBAL) – Russia surpassed Saudi Arabia as the largest crude oil supplier to China over the past two months as Western sanctions due to Moscow’s war with Ukraine dragged down prices of its petroleum exports, boosting their appeal among Asian buyers.

Last month, China imported 7.3 million tons of crude oil from Russia, up 9.5 per cent from the same period in 2021, according to data provided to Caixin on request from the General Administration of Customs. Oil imports jumped 54.8 per cent year-on-year to 8.4 million tons in May. Oil imports from Russia in May and June were 7.7 per cent and 44 per cent higher, respectively, than those from Saudi Arabia, the data showed.

Saudi Arabia has long been the largest crude oil supplier to China, while Russia was the runner-up. However, Saudi Arabia remained the largest overall oil exporter to China in the first half of 2022, data showed.

In the first six months, Saudi Arabia accounted for 17.1 per cent of China’s total 253 million tons of crude oil imports, while Russia had a 16.4 per cent share. Lower prices for Russian oil amid western sanctions on the country in the wake of the war with Ukraine fueled purchases by China, according to JLC, a commodity market information provider.

The average price of Russian oil was US$94.60 (S$131.30) per barrel in June, 18.8 per cent lower than that from Saudi Arabia and marked the second consecutive month of a price decline, the customs data showed.

The European Union has imposed a partial embargo on Russian crude oil and petroleum products, saying that the sanctions would cut off around two-thirds of Russian oil supplies to the bloc. Russia has been reorienting its oil and gas exports from Europe to Asia, mainly India and China.

Some analysts estimate that Asian importers would take advantage of the opportunity to secure discounted crude oil from Russia, although they are not able to absorb all of seaborne exports it previously sent to Europe.

The EU also banned shipping insurance for oil exports from Russia, further curbing demand from the region. “It is possible that alternative insurance providers in Russia, China, India, or other countries will step up in the coming months to facilitate this trade,” Ben Cahill, a senior fellow at the Center for Strategic and International Studies, a US think tank, wrote in a note.

China’s overall oil imports dropped 3.1 per cent in the first half due to sluggish demand amid slowing economic growth and disruptions caused by sporadic Covid-19 lockdowns. In June, crude oil imports fell 10.6 per cent year-on-year to 35.8 million tons, down 22 per cent from the previous month.

This story was originally published by Caixin Global.