Chinese oil giant Hengli Petrochemical has cancelled purchases of approximately 2 million barrels of West African crude oil and significantly reduced refinery operations, highlighting the growing impact of U.S. sanctions on one of the country’s largest independent refiners and raising fresh concerns about demand for African crude exports.
The company has scrapped contracts covering at least 6 million barrels of non-Iranian crude oil, including 2 million barrels sourced from West Africa and an additional 4 million barrels from the Middle East. Industry sources describe the cancellations as highly unusual because crude purchase agreements are rarely abandoned after they have been concluded, particularly when some cargoes have already been delivered or scheduled for shipment.
According to traders familiar with the transactions, the cancelled West African cargoes had already arrived at third-party storage facilities in eastern China, while the Middle Eastern shipments were scheduled for delivery in July. At least one of those Middle Eastern cargoes has reportedly been resold, reflecting the company’s efforts to reduce its crude commitments as inventories decline and refinery operations slow.
The latest move comes only weeks after Hengli shifted its purchasing strategy toward West African and Middle Eastern crude in an effort to diversify away from Iranian supplies. Earlier this year, the company purchased around 2 million barrels of West African crude as part of attempts to demonstrate compliance with international trade restrictions following sanctions imposed by the United States.
Washington sanctioned Hengli Petrochemical in April, alleging that the company had purchased Iranian crude oil in violation of U.S. sanctions. Hengli has consistently denied buying Iranian oil and subsequently indicated that it intended to cooperate with U.S. authorities in hopes of being removed from the sanctions list. The company responded by adjusting its procurement strategy, sourcing alternative grades of crude from suppliers in West Africa and the Middle East.
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Despite those efforts, the sanctions have continued to affect the company’s operations. Industry sources indicate that Hengli has suspended new crude arrivals for July and reduced activity at its large refining complex in Dalian, northeastern China. One of the refinery’s two main crude processing units has reportedly been shut down, reducing utilisation rates to about 50%, compared with more than 80% in May. The lower operating rate reflects declining feedstock inventories following the cancelled cargoes and uncertainty surrounding future crude supplies.
The development has attracted significant attention across global energy markets because contract cancellations of this scale are uncommon in the international oil trade. Traders note that abruptly terminating cargo agreements can damage long-term commercial relationships with suppliers and trading houses, potentially making it more difficult to secure favourable contracts in the future.
For West African producers, the cancelled shipments represent another reminder of how geopolitical developments can quickly influence demand for regional crude. Countries including Nigeria, Angola and the Republic of Congo have increasingly relied on Chinese refiners as major buyers of their crude exports. Independent refiners, often referred to as “teapots,” account for a substantial share of China’s imports of medium and light sweet crude grades commonly produced in West Africa.
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Although the cancellation affects only a limited volume relative to China’s total crude imports, analysts say it could temporarily weaken demand for some West African export grades if other refiners do not replace the purchases. Traders are expected to closely monitor whether competing Chinese refiners absorb the displaced cargoes or whether exporters redirect shipments to alternative markets in Asia or Europe.
The situation also highlights the continuing influence of sanctions on global energy supply chains. Even when companies attempt to diversify suppliers, restrictions affecting financing, shipping, insurance and payment systems can complicate procurement decisions and disrupt normal trading patterns. These pressures have encouraged refiners to reassess sourcing strategies while balancing commercial considerations with geopolitical risks.
Energy analysts note that China’s overall crude demand remains relatively resilient despite the disruption affecting Hengli. The country’s larger state-owned refiners continue to import significant volumes of crude from a wide range of international suppliers, helping to maintain China’s position as the world’s largest crude oil importer. However, operational challenges facing major independent refiners could create short-term volatility in purchasing patterns and refinery utilisation.
Market participants are also watching whether Hengli’s actions represent an isolated response to sanctions or signal broader caution among Chinese independent refiners navigating an increasingly complex global trading environment. Any prolonged reduction in refinery throughput could influence regional crude pricing and alter export flows from key producing regions, including West Africa.
For African oil exporters, maintaining diversified customer bases remains essential as global demand patterns continue to evolve. While China’s appetite for crude oil remains strong overall, the Hengli case illustrates how policy decisions and international sanctions can quickly reshape trade flows, reinforcing the importance of flexibility in an increasingly interconnected global energy market.
