Omanghana
China’s Hengli Petrochemical has cancelled purchases totaling at least 6 million barrels of crude oil, including 2 million barrels of West African crude, as U.S. sanctions continue to disrupt operations at one of the country’s largest independent refiners.
The unusual move underscores the growing impact of Washington’s restrictions on Chinese energy companies, with Hengli now scaling back refinery operations and struggling to secure alternative crude supplies.
U.S. Sanctions Continue to Pressure Hengli
Hengli Petrochemical has faced mounting challenges since the United States imposed economic sanctions on the company in April 2026 over allegations that it had purchased prohibited Iranian crude oil.
U.S. authorities accused the refiner of violating sanctions targeting Iran’s oil exports. Hengli has denied the allegations.
In an effort to demonstrate compliance, the company shifted its procurement strategy in June by seeking supplies from mainstream producers, including West Africa and the Middle East. The move was widely viewed as an attempt to reduce reliance on sanctioned sources while lobbying for removal from the U.S. blacklist.
However, the latest cancellation of already-contracted cargoes represents a dramatic reversal of that strategy and is considered highly unusual in global oil markets, where refiners rarely withdraw from finalized purchase agreements.
Six Million Barrels of Oil Cancelled
The cancelled shipments span multiple producing regions and amount to at least 6 million barrels of crude oil.
The affected cargoes include:
- 2 million barrels of West African crude, which had already arrived at third-party storage facilities in eastern China last month.
- 4 million barrels of Middle Eastern crude, consisting of two separate cargoes originally scheduled for delivery during July 2026.
According to industry sources, one of the Middle Eastern shipments has already been resold to another buyer following Hengli’s cancellation.
Refinery Output Slashed
The sanctions have also forced Hengli to significantly reduce operations at its flagship refinery in northeastern China.
In late June, the company shut down one of the refinery’s two 200,000-barrel-per-day crude distillation units, cutting total processing capacity at the 400,000-barrel-per-day facility in half.
The refinery is now operating at approximately 50% capacity, a sharp decline from around 70% earlier in June and more than 80% in May.
The production cuts highlight the increasing difficulty sanctioned companies face in arranging payments, securing shipping services, and obtaining replacement crude supplies through conventional trading channels.
Emergency Oil Stocks Under Pressure
When the sanctions were announced in April, Hengli stated that it possessed more than three months of emergency crude inventories, providing a temporary buffer against supply disruptions.
However, with replacement cargoes becoming increasingly difficult to secure and new deliveries being cancelled, those reserves are reportedly being depleted rapidly, raising concerns about the refinery’s ability to maintain current operating levels.
Market Impact
The cancellation of millions of barrels of crude purchases adds fresh uncertainty to global oil trade flows, particularly for exporters in West Africa and the Middle East that had anticipated deliveries to one of China’s largest independent refiners.
As U.S. sanctions continue to reshape global energy supply chains, Hengli’s operational challenges illustrate the far-reaching consequences of geopolitical tensions on international crude markets and China’s independent refining sector.
Source: Omanghana
