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Private Chinese refiners, who buy most of Iran’s crude, have recently scoured West Africa and the Middle East for supply unsold in previous trade cycles, as flows of Iranian crude have dropped amid higher prices and preparation for the incoming Trump Administration.
China’s independent refiners, the so-called teapots, are key buyers of Iran’s sanctioned crude, and the two sides have established a trade relationship favorable for both. Iran gets to sell its crude that nearly everyone else shuns, while China’s independent refiners get cheap oil.
However, Iran’s crude oil going to China these days is priced at its narrowest discount to Brent in five years as Iranian cargo loadings slumped last month amid fears that Israel would target Tehran’s energy facilities in response to the Iranian missile attack on Israel on October 1.
Yet, China imported record volumes of Iranian crude last month, per Kpler data cited by Bloomberg. This month, the crude arrivals from Iran are set to be 10% lower compared to October, according to Kpler.
Large refiners with exposure to the U.S. banking system have started to back away from purchases of Iranian crude oil, awaiting tougher U.S. sanctions on Iran once President-elect Donald Trump takes office, consultants at Energy Aspects told Bloomberg.
Fresh U.S. sanctions on Iran’s dark fleet have also cut Iranian supply as the sanctioned vessels have reduced the number of shadow fleet tankers for ship-to-ship (STS) transfers to mask the Iranian origin of the crude.
In light of reduced Iranian supply, China’s independent refiners have been looking to buy more crude from other sources.
One of the large private refiners has recently purchased some 10 million barrels of crude for December and January loading from Middle Eastern producers Qatar and the United Arab Emirates (UAE), which had remained unsold from previous trading cycles, anonymous trade sources have told Bloomberg.
