Iranian crude offers to China shrink as US blockade tightens
Iranian oil offers to Chinese buyers have dropped and prices have risen after the US reimposed a blockade, squeezing independent refiners.
Offers of Iranian crude to Chinese buyers have dwindled and prices have climbed this week as the US blockade curbs Tehran's shipments, according to trade sources. The reimposition of the blockade on July 13, following the collapse of a US-Iran war deal, has cut off a key source of hard currency for Tehran and compounded losses from earlier strikes on its energy infrastructure.
Four trade sources said the number of cargoes offered for September and October delivery has fallen compared with July and August, as barrels already at sea have been sold. Ship-tracking data from Kpler shows no visible supertanker crossings of the Strait of Hormuz carrying Iranian crude since mid-July, though many vessels switch off transponders, complicating tracking.
The squeeze threatens independent Chinese refiners, known as teapots, concentrated in Shandong province. These plants account for about a fifth of China's refining capacity and are the top buyers of sanctioned oil. Three sources said some Iranian crude, typically sold at a discount, is now being offered at premiums to ICE Brent, with one citing a premium of about $2 a barrel. Earlier this week, Iranian Light was offered at a discount of around $3, the same as a month earlier.
Floating storage outside the blockade zone has fallen to about 80 million barrels from roughly 105 million before the blockade, Kpler data shows. Two sources estimated only about 30 million barrels remain in Asian waters, half the usual level. Kpler analyst Muyu Xu put the figure at 40 million barrels in Malaysian waters east of Singapore, most already promised to buyers. She warned that buyers could face virtually no new Iranian supplies for late-September delivery onward.
In response, one teapot has bought Brazil's Lapa crude this week, while others are eyeing Iraq's Basrah grade. "Given the thin Iranian availability amid the US blockade, Chinese teapots are now looking beyond Russia and Iran," said Sun Jianan, senior oil analyst at Energy Aspects.
China's Iranian imports fell to 785,000 barrels per day (bpd) in June, the lowest since February 2023, and rose to 823,000 bpd in July, but August intake has dropped to 534,000 bpd, according to Kpler. Last year, China averaged 1.4 million bpd from Iran.
US Treasury Secretary Scott Bessent on Thursday threatened Iran with "the toughest sanctions in history," with details expected Monday, to pressure Tehran to reopen the Strait of Hormuz. Chinese independent refiners are on alert for sanctions targeting specific buyers, though one source said new measures were unlikely to deter purchases, noting that previously sanctioned refiners continue processing Iranian oil.
China buys more than 80% of Iran's shipped oil, according to Kpler data. Beijing has rejected unilateral sanctions, with a foreign ministry spokesperson saying on Thursday that sanctions will not resolve the conflict.