China’s crude oil inventories increased recently by a whopping 26.5 mb to 937.83 mb. This increase came at a time when a decrease was expected given high oil prices.  Worth noting that about 5 mb of the additions went to China’s Strategic Petroleum Reserves (SPR).  

We think this sudden increase in inventories was caused mostly by the opportunistic purchase of about of Russian Sokol crude at a large discount. About a dozen tankers laden with Sokol crude got stuck at sea for weeks after India refused to accept them over a price dispute. If this is the case and our assessment is correct, then this increase in inventories does not constitute any change in the market nor in Chinese policy. It is just a one-time opportunistic purchase.  The fact that all the increase was reported in one week gives credence to our point. This gives China more pricing power as it might continue its policy of using its inventories to influence prices.

Just to be clear: India’s refusal to receive the Sokol shipments has nothing to with sanctions on Russia no the price cap.