China Pauses Some Russian Crude Purchases on US Sanctions

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00:00Chinese state companies cancelling some purchases of Russian crude.

00:03The move's coming after fresh U.S. sanctions on Russia's two largest energy producers.

00:07Joining us now to discuss is Bloomberg's Javier Blas.

00:10Javier, welcome to the programme, sir.

00:11The president made a big move.

00:13We wanted to understand how China, how India would respond to it.

00:16Javier, what are you and the team learning in London?

00:20What we are learning first is that everyone is taking a pause.

00:24Companies are reassessing their contracts,

00:26are looking at the finer wording of the sanctions,

00:30and they're also looking at what the White House is going to do,

00:32because one thing is announcing sanctions, and another one is to wall the talk.

00:36Will President Trump allow prices to go much higher,

00:41and will we be enforcing those sanctions strongly?

00:45History tells us that he will not.

00:47Neither President Biden nor President Trump have shown any appetite for high oil prices,

00:51and I think that that's going to continue.

00:52So, there is a pause at the moment of taking more Russian oil,

00:57but that pause is that, a pause.

00:59We don't know what the companies are going to be doing next,

01:02and my expectation is that some of that oil is going to continue to flow.

01:06Javier, if we do get secondary sanctions,

01:08or less of these oils are flowing to India or China,

01:12who's going to step in and fill the gap?

01:16Well, the good news for President Trump is that there is plenty of oil in the market.

01:21OPEC has been increasing production.

01:23Saudi Arabia, the United Arab Emirates, Iraq,

01:25a number of countries in the Middle East have increased production in recent months,

01:29and they have announced their intention to continue increasing production.

01:33So, there will be enough oil in the market,

01:36and that's why I think that the White House is acting now.

01:40They were not acting when prices were much higher earlier this year,

01:44but they are acting in a moment that we are heading into a surplus,

01:46so the market can easily absorb the heat if that heat really materialized

01:52and became a permanent heat, which I have significant doubts.

01:56Well, what about U.S. companies like Exxon?

02:00Can they also start filling the gap if they get higher oil prices?

02:03Will we see American companies start drilling again?

02:07Well, American oil companies are drilling right now.

02:10It's not that they're going to be doing it again.

02:12They're doing it now, and American oil production on a total basis,

02:16total petroleum production in the United States,

02:18is running about a million barrels a day higher than last year.

02:22So, U.S. production is increasing.

02:24So, it's also American demand for that oil.

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