China's heavy reliance on Iranian oil imports

Reuters

6 days ago

SINGAPORE, June 24 (Reuters) - China is the main buyer of oil from Iran, which accounts for roughly 13.6% of purchases this year by the world's largest crude importer, leaving Beijing uniquely exposed to any supply disruption from conflict in the Middle East.
Beijing, which is also the biggest buyer of oil from Venezuela and a top importer of oil from Russia, has used purchases from the three countries facing various Western sanctions to save billions of dollars on its import bill in recent years.
China buys roughly 90% of Iran's shipped oil, which has limited buyers due to U.S. sanctions aimed at cutting off funding to Tehran's nuclear programme.
In the first six months of this year, China purchased an average of 1.38 million barrels per day of Iranian oil, according to Kpler data.
Last year, China's Iran purchases averaged 1.48 million bpd, or about 14.6% of China's imports, according to Kpler.
Chinese independent refiners known as teapots, clustered mainly in Shandong province, are the main buyers of Iranian crude, drawn by its discount to non-sanctioned barrels.
Teapots, which account for roughly one-quarter of Chinese refinery capacity, operate on narrow and sometimes negative margins and have been squeezed recently by tepid domestic demand for refined products.
China's big state oil companies have refrained from buying Iranian oil since 2018/2019, traders and experts have said.
Iranian light crude traded at $3.30-$3.50 a barrel below ICE Brent for July deliveries, Reuters reported on Friday, compared to discounts of around $2.50 for June, three traders said, as teapots slowed buying and sellers looked to cut inventories.
Compared to non-sanctioned oil from the Middle East, Iranian oil currently trades at a roughly $7-8 per barrel discount, according to traders.
Washington reinstated sanctions on Tehran in 2018, and President Donald Trump's administration has imposed several new rounds of sanctions on Iran's oil trade since taking office in January.
Trump's sanctions have included penalties on three Chinese teapots, which has led to curtailed buying from several mid-sized independents worried about being designated, Reuters reported.
One trader estimated that non-sanctioned oil has replaced about 100,000 bpd of Iranian oil to China this year.
Beijing rejects unilateral sanctions and defends its trade with Iran as legitimate.
Iranian oil imported by China is typically labelled by traders as originating from other countries, such as Malaysia, a major transshipment hub.
Chinese customs data has not shown any oil shipped from Iran since July 2022.