Oil Price Hits $120 as China Blocks US Sanctions on Five Refineries

China’s Ministry of Commerce issued an injunction on May 2 voiding US sanctions on five Chinese oil refineries. The move marks Beijing’s first formal use of its 2021 anti-sanctions blocking rules.

The order names Hengli Petrochemical, Shandong Jincheng, Hebei Xinhai, Shouguang Luqing, and Shandong Shengxing. The Ministry of Commerce of the People’s Republic of China (MOFCOM) said the sanctions violated international law and barred Chinese firms from complying.

China’s First Formal Use of Its 2021 Anti-Sanctions Blocking Rules Sends Oil Price Past $120

China’s MOFCOM invoked its 2021 blocking statute for the first time, ordering all firms not to recognize, enforce, or comply with US sanctions under Executive Orders 13902 and 13846.

The measures targeted five “teapot” refineries (including Hengli Petrochemical) for their dealings in Iranian oil, calling them unlawful extraterritorial overreach that violates international law. (38 words)

Crude futures showed a muted reaction because the announcement landed when major markets were closed.

However, spot Brent soared past $120 per barrel before profit-booking pulled the price back down to $114.159 as of this writing.

Traders had already priced in continued Chinese demand for Iranian barrels through opaque shipping channels. Local media reported Hengli alone faces accusations of buying billions of dollars in Iranian crude since 2023.

Shadow fleet vessels and ship-to-ship transfers helped mask the origins of cargo along the route.

However, the injunction shields the refiners only from domestic compliance pressure. They remain exposed to dollar-denominated transaction risks through correspondent banking.

Washington warned global banks last week about handling Hormuz-linked trade flows tied to teapot refiners.

Macro Signal Carries Weight for Crypto and Risk Assets

A floor under oil prices keeps inflation expectations sticky. That tends to delay rate-cut bets and pressure risk assets across the board.

Bitcoin (BTC) has historically tracked oil shock cycles, with Middle East disruptions feeding crypto volatility.

Meanwhile, the order reinforces broader de-dollarization themes circulating through 2026. China has pushed yuan settlement and digital currency rails for cross-border trade.

Iran has separately demanded crypto-denominated transit fees from tankers passing the Strait of Hormuz.

A potential Trump-Xi summit looms on the diplomatic calendar. Markets will watch Monday’s open for any sustained reaction.

Traders also want to see whether the US responds with secondary sanctions on banks handling refinery payments.

The next test is whether other Chinese firms invoke the blocking rules to challenge US measures.

The alternative scenario sees the order standing as an isolated signal before high-stakes diplomacy resumes.