Private Chinese refiners, who are the main buyers of Iranian crude, have recently shifted their focus to West Africa and the Middle East. They are seeking oil that was unsold in previous trade cycles as supplies from Iran continue to decline. This drop in Iranian crude flows comes amid rising prices and preparations for the incoming U.S. administration under President-elect Donald Trump.
The so-called “teapot” refiners in China play a crucial role in buying Iran’s sanctioned crude oil. This trade relationship has been mutually beneficial: Iran can sell oil that is largely shunned by other nations, while China’s independent refiners benefit from cheap crude.
However, the price of Iranian crude going to China has recently narrowed to its smallest discount against Brent in five years. This is due to a drop in Iranian cargo loadings last month, partly driven by concerns that Israel might target Iran’s energy infrastructure in response to an Iranian missile attack on Israel on October 1. Despite this, data from Kpler, as reported by Bloomberg, shows that China imported record volumes of Iranian crude in October. But imports in November are expected to be about 10% lower than the previous month.
Large Chinese refiners with ties to the U.S. banking system have begun to scale back purchases of Iranian oil in anticipation of stricter U.S. sanctions once Trump takes office, according to Energy Aspects consultants speaking to Bloomberg.
Additionally, fresh U.S. sanctions on Iran’s “dark fleet”—a group of vessels used to transport Iranian crude covertly—have further reduced supply. These sanctioned vessels have been key in facilitating ship-to-ship transfers that mask the Iranian origin of the crude.
As Iranian supplies dwindle, China’s independent refiners are seeking alternative sources. One major private refiner, for instance, has recently purchased around 10 million barrels of crude from Middle Eastern producers Qatar and the UAE. This oil, which had been left unsold in earlier trading cycles, will be delivered for December and January loading, according to anonymous trade sources.
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