Oil & Gas

Business:
Major oil suppliers, including TotalEnergies, BP, Saudi Aramco, Kuwait Petroleum, and PetroChina, have withdrawn from supplying China’s Yulong Petrochemical following UK sanctions that take effect on November 13. The sanctions target entities believed to help fund Moscow’s war in Ukraine, and Yulong one of China’s largest single buyers of Russian oil has been caught in the crossfire. The refiner’s spot cargoes from the Middle East and Canada have been abruptly cancelled, disrupting at least four shipments totaling millions of barrels. Swiss trader Trafigura, which supplies 2 million barrels a month to Yulong, is also reviewing its deals under G7 price-cap compliance rules, further tightening the noose on Yulong’s crude access.

Economic:
The cancellations underscore how sanctions are reshaping supply chains, driving Yulong and similar refineries toward riskier, discounted Russian barrels. Analysts warn the refiner may soon rely on sanctioned crude for up to 80% of its operations, echoing India’s Nayara Energy, which was forced to cut runs after similar restrictions. This shift could distort global oil markets by redirecting more sanctioned crude into Asia at lower prices while squeezing legitimate traders who depend on open payment systems. For the Chinese energy market, it raises questions about financial exposure and currency risks, as Western banks increasingly refuse to process payments linked to sanctioned entities, pushing refiners toward alternative settlement systems and non-dollar trades.

Geopolitical:
The Yulong sanctions highlight growing fault lines between the West’s sanctioning powers and Asia’s energy-hungry economies. As Europe doubles down on isolating Russia’s revenue streams, Beijing appears ready to deepen its cooperation with Moscow to secure steady supply a stance that could draw further friction with Washington and London. The episode also signals how sanctions on Russia are indirectly pressuring China’s energy infrastructure, while prompting the emergence of new “grey” trade routes managed by smaller firms without Western links. Built on a man-made island in Shandong province, Yulong Petrochemical’s pivot to Russian oil not only tightens China-Russia energy ties but also symbolizes how sanctions designed for one country are redrawing the world’s entire oil map.