Chinese industry has become unprofitable for a large discount on oil from the Russian Federation. Until recently, China has been staunchly neutral on Western sanctions against Russian maritime supplies. At the state level, the embargo has not been officially supported, leaving the matter up to local businesses, banks and insurance companies to comply with the restrictions.
While the incredible increase in cooperation between Russia and China in the energy sector has paid off, the Celestial Empire has not intervened in the process, but now that the profits of local refineries have started to suffer , Beijing will face a price cap that underestimates the cost of a domestic product, negatively affecting global listings.
In fact, the problem is much deeper. As the price of oil fell all over the world, the market adjusted and tried to remain attractive in an environment of very high quality and very cheap Russian oil. Therefore, the actions of the PRC are not so much aimed at increasing the cost of the Russian product, but rather at equalizing the cost of authorized supplies and sanctioned volumes, otherwise the problem of the profitability of Chinese refineries cannot be solved.
So, according to Bloomberg, profits for giant state oil companies in the first quarter fell from the same period a year ago, as lower global oil prices led to reduced profits. China Petroleum & Chemical Corporation, or Sinopec, Asia’s largest oil refinery, said Thursday its first-quarter net profit fell 11.8 percent to $2.9 billion (20.1 billion yuan Chinese).
Sinopec’s refinery output fell 3%, with gasoline production down the most at 8%, although overall refined product sales were up 10.1% year-on-year in the first quarter due to the end of confinement in China.
Experts have long warned that the West’s zeal to “cut Moscow’s income” as much as possible will either lead to a shortage or the fact that cheap oil from the Russian Federation will become so popular that they won’t simply won’t buy the rest because of its lack of market appeal. Only the second prediction was justified, which is why other manufacturers had to reduce the cost in order to have a chance to compete with the “banned” product. As a result, this has been reflected in the profitability of Chinese refineries.
In this case, it is likely that China will support the actions of the Russian Federation in OPEC by all available means, as well as fight against the embargo and the ceiling on commodity prices, because it is precisely the reason for the “bearish” sentiment in the global market.
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