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CNBC
a day ago
- Business
- CNBC
China skirts U.S. sanctions as top buyer of Iranian oil — here's how, and why that's unlikely to change soon
For years, China has been buying discounted Iranian oil in bulk, and the U.S. sanctions on Tehran have barely put a dent in that trade, analysts said, thanks to a shadow supply chain of transshipment and a yuan-denominated payment system that bypasses the U.S. dollar. Chinese customs have not shown any oil shipped from Iran since July 2022. Ship tracking data from analytics firm Kpler, however, indicated China's Iranian crude imports have continued to rise since then, nearly doubling to 17.8 million barrels per day (mbd) in 2024 from the 2022 level. In the first five months of this year, those imports have remained at an elevated level of 6.8 mbd, little changed from the same period in 2024. China is still the largest consumer of Iranian crude by far. The U.S. Energy Information Administration suggested in a report in May that nearly 90% of Iran's crude oil and condensate exports continued to flow to China. Iran has faced some of the broadest sanctions the U.S. has imposed on any country as Washington sought to choke the regime's main source of revenue that was used to fund its nuclear program and militias such as Hamas and Hezbollah. The Trump administration has been actively imposing fresh sanctions on tankers involved in facilitating Iranian crude to China. Nonetheless, that has put a little dent on Iranian oil exports, said Brian Leisen, global energy strategist at RBC Capital Markets, who added that "the physical market has not seen any long-term impact to the flow of Iranian oil since the [Trump] administration took office." Iranian petroleum and petrochemical sales were estimated to have generated as much as $70 billion in 2023, according to a U.S. Congress report last year. Foreign oil buyers are drawn to Iranian petroleum exporters because they are often sold at a discount compared to Persian Gulf or price-capped Russian suppliers. Iranian Light oil was traded at about $6 to $7 cheaper than the United Arab Emirates Upper Zakum crude — a non-sanctioned grade and at similar quality as Iran Light — at $64 per barrel, Muyu Xu, senior oil analyst at Kpler told CNBC Thursday. China's independent refineries, known as "teapots," have in recent years been the major buyers of cheap Iranian crude, as big private refiners and state-owned firms still shun the sanctioned crude, multiple industry analysts said. These teapots often purchase Iranian crude on a delivered basis, meaning the sellers would arrange for carriage by sea to the place of delivery, shielding the Chinese buyers from the risk of transportation, Xu noted. While some Iranian cargoes are shipped directly from Iran to China, the majority undergo multiple ship-to-ship transfers, often in the Middle East Gulf or the Strait of Malacca, where Iranian oil transported by sanctioned vessels is transferred to non-sanctioned tankers before shipping to China. "[The] Middle East is a multi-origin oil market and if the cargo gets transported from ship to ship, it is not easy to trace once documents are switched," said Punit Oza, president at the Institute of Chartered Shipbrokers. Tankers loading in Iran would also do what's called "spoofing" — where they broadcast fake tanker route information to mask their involvement in this trade, analysts said. These payments are typically made in renminbi and through small U.S.-sanctioned banks, shielding the buyers from exposure to the U.S.-dollar dominated system, which avoids exposing China's large international banks to the risk of US sanctions. "Because there is no dollar exposure, being excluded from the SWIFT payments systems does not pose a large impediment for oil flows to continue," said Brian. SWIFT is the world's main international payment network, dominated by the greenback. The area to the East of Peninsula Malaysia has seen bustling ship-to-ship activity and is a "hot spot for Iranian oil," where crude oil gets transshipped onto other vessels before ending up in China, said Bridget Diakun, senior risk and compliance analyst at Lloyd's List Intelligence. "I've seen a lot of tankers spoofing their location off Malaysia recently, with these ships taking an additional precaution to hide the ship-to-ship and obfuscate the origin of cargo," Diakun said. As the U.S. continued to intensify sanctions, Iranian oil owners and shipping operators would take additional steps to make the supply chain "more complicated and tracking vessels more confusing" in order to carry on with these trades, Diakun added. China's crude imports from Malaysia increased significantly last year to 1.4 million barrels per day from 1.1 million barrels per day in 2023, which exceeded Malaysia's domestic crude oil production of around 0.6 million, according to EIA. U.S. President Donald Trump earlier this week surprised markets with a post on Truth Social that China can continue to purchase Iranian oil, in an apparent disregard of his earlier policies to squelch Iran's oil exports. U.S. crude oil prices tumbled 6% following his comment. A senior White House official later clarified to CNBC that Trump's comments do not indicate a relaxation of U.S. sanctions. Kpler's Xu saw Trump's remarks as a "calculated trade-off," aimed at encouraging Iran to uphold the ceasefire and re-engage in nuclear talks, while signaling "goodwill" to China ahead of the next round of trade negotiations. "It is now too early to say whether this points to a potential waiver on Iranian sanctions," she said, noting the possibility of Washington slowing the pace of new sanctions — which would further support such purchases by Chinese teapots. While there is still "no clear conclusion for Iran despite ceasefire, for the physical oil market, we expect oil exports to continue as usual," RBC's Brian noted. Speaking at a news conference at the NATO summit this week, Trump said Iran is "going to need money to put that country back into shape," raising hopes that an easing of the "maximum pressure" campaign against Iran could be on the table.
Business Times
09-05-2025
- Business
- Business Times
US sanctions on China refiners over Iran oil disrupt operations: sources
[SINGAPORE] Recent US sanctions on two small Chinese refiners for buying Iranian oil have created difficulties receiving crude and led them to sell product under other names, sources familiar with the matter said, evidence of the disruption that Washington's stepped-up pressure is inflicting on Tehran's biggest oil buyer. The targeting of independent refiners, known as teapots, marked an escalation in Washington's efforts to cut off Tehran's export revenue as US President Donald Trump seeks to pressure Iran into a deal over its nuclear programme. Washington's sanctions against Shandong Shouguang Luqing Petrochemical in March and Shandong Shengxing Chemical in April have also begun to deter other, larger independent Chinese refiners from buying Iranian crude, three of the sources said. About five plants in the refining hub of Shandong province have halted purchases of Iranian oil since last month, worried about being hit by sanctions, two trading executives said. That wariness is the main reason discounts for Iranian Light have widened to US$2.30 to US$2.40 a barrel against ICE Brent from about US$2 a month ago, the executives and another source said. Among the inconveniences faced by the two sanctioned teapots, state-run Shandong Port Group, the main port operator in the province, has denied entry to vessels loaded with crude they have purchased, five trade sources said. That follows the port group's January ban on port calls by US-sanctioned tankers. Shandong Port Group and Shengxing did not respond to requests for comment. A Luqing executive declined to comment. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Large state banks have also stopped providing Luqing with operational capital for purchasing crude, forcing it to work with smaller banks, four of the sources said. The sources declined to be identified due to the sensitivity of the matter. Beijing says it opposes unilateral sanctions and defends as legitimate its trade with Iran, which ships about 90 per cent of its oil exports to China. However, Chinese customs data has not shown any oil shipped from Iran since July 2022, with Iranian crude imports instead labelled as originating from Malaysia or other countries. Shipping, sales headaches The Shandong Port Group's banning of cargoes for the two refineries has forced them to discharge at other ports, according to three sources. In one case, the tanker Bei Hai Ming Wang carrying oil for the Shengxing refinery was rejected when it sought to land at the Laizhou port, controlled by Shandong Port Group, around Apr 21, according to a source familiar with the matter. It eventually unloaded on May 2 at the privately owned Wantong Crude Oil Terminal in neighbouring Dongying, data from analytics firm Vortexa showed. In another sign of trading disruption from the sanctions, two Asia-based oil product traders who had previously dealt with Luqing said they stopped doing so after it was sanctioned. In addition, no shipments of petrol blendstock have been recorded since the end of March out of Laizhou port, used by Luqing for most of its blendstock exports, Kpler and LSEG ship tracking data showed. That contrasts with the first three months of this year when 83,000 metric tonnes (701,000 barrels) of methyl tertiary butyl ether, a key petrol blendstock export, were shipped from Laizhou, accounting for 15 per cent of China's total outflow of the blendstock. State giant China National Offshore Oil Corporation (Cnooc) stopped supplying crude to Shandong Haihua Group's 40,000 barrel-per-day refinery, operated by Luqing, shortly after the US sanctions were announced, three trade sources and a Shandong-based Chinese oil market consultant said. Cnooc did not respond to a request for comment. Calls to Haihua went unanswered. The two teapots have also begun selling product through new entities, according to seven trade sources, with Luqing using Shouguang Jiaqing Petroleum Sales and Shengxing selling via Shandong Xuxing Petrochemical. Calls to the two entities seeking comment went unanswered. REUTERS
Yahoo
08-05-2025
- Business
- Yahoo
Exclusive-US sanctions on China refiners over Iran oil disrupt operations, sources say
By Siyi Liu, Trixie Yap and Chen Aizhu SINGAPORE (Reuters) -Recent U.S. sanctions on two small Chinese refiners for buying Iranian oil have created difficulties receiving crude and led them to sell product under other names, sources familiar with the matter said, evidence of the disruption that Washington's stepped-up pressure is inflicting on Tehran's biggest oil buyer. The targeting of independent refiners, known as teapots, marked an escalation in Washington's efforts to cut off Tehran's export revenue as President Donald Trump seeks to pressure Iran into a deal over its nuclear programme. Washington's sanctions against Shandong Shouguang Luqing Petrochemical in March and Shandong Shengxing Chemical in April have also begun to deter other, larger independent Chinese refiners from buying Iranian crude, three of the sources said. About five plants in the refining hub of Shandong province have halted purchases of Iranian oil since last month, worried about being hit by sanctions, two trading executives said. That wariness is the main reason discounts for Iranian Light have widened to $2.30-$2.40 a barrel against ICE Brent from about $2 a month ago, the executives and another source said. Among the inconveniences faced by the two sanctioned teapots, state-run Shandong Port Group, the main port operator in the province, has denied entry to vessels loaded with crude they have purchased, five trade sources said. That follows the port group's January ban on port calls by U.S.-sanctioned tankers. Shandong Port Group and Shengxing did not respond to requests for comment. A Luqing executive declined to comment. Large state banks have also stopped providing Luqing with operational capital for purchasing crude, forcing it to work with smaller banks, four of the sources said. The sources declined to be identified due to the sensitivity of the matter. Beijing says it opposes unilateral sanctions and defends as legitimate its trade with Iran, which ships about 90% of its oil exports to China. However, Chinese customs data has not shown any oil shipped from Iran since July 2022, with Iranian crude imports instead labelled as originating from Malaysia or other countries. SHIPPING, SALES HEADACHES The Shandong Port Group's banning of cargoes for the two refineries has forced them to discharge at other ports, according to three sources. In one case, the tanker Bei Hai Ming Wang carrying oil for the Shengxing refinery was rejected when it sought to land at the Laizhou port, controlled by Shandong Port Group, around April 21, according to a source familiar with the matter. It eventually unloaded on May 2 at the privately owned Wantong Crude Oil Terminal in neighbouring Dongying, data from analytics firm Vortexa showed. In another sign of trading disruption from the sanctions, two Asia-based oil product traders who had previously dealt with Luqing said they stopped doing so after it was sanctioned. In addition, no shipments of gasoline blendstock have been recorded since the end of March out of Laizhou port, used by Luqing for most of its blendstock exports, Kpler and LSEG shiptracking data showed. That contrasts with the first three months of this year when 83,000 metric tons (701,000 barrels) of methyl tertiary butyl ether, a key gasoline blendstock export, were shipped from Laizhou, accounting for 15% of China's total outflow of the blendstock. State giant CNOOC stopped supplying crude to Shandong Haihua Group's 40,000 barrel-per-day refinery, operated by Luqing, shortly after the U.S. sanctions were announced, three trade sources and a Shandong-based Chinese oil market consultant said. CNOOC did not respond to a request for comment. Calls to Haihua went unanswered. The two teapots have also begun selling product through new entities, according to seven trade sources, with Luqing using Shouguang Jiaqing Petroleum Sales and Shengxing selling via Shandong Xuxing Petrochemical. Calls to the two entities seeking comment went unanswered.
Yahoo
08-05-2025
- Business
- Yahoo
Exclusive-US sanctions on China refiners over Iran oil disrupt operations, sources say
By Siyi Liu, Trixie Yap and Chen Aizhu SINGAPORE (Reuters) -Recent U.S. sanctions on two small Chinese refiners for buying Iranian oil have created difficulties receiving crude and led them to sell product under other names, sources familiar with the matter said, evidence of the disruption that Washington's stepped-up pressure is inflicting on Tehran's biggest oil buyer. The targeting of independent refiners, known as teapots, marked an escalation in Washington's efforts to cut off Tehran's export revenue as President Donald Trump seeks to pressure Iran into a deal over its nuclear programme. Washington's sanctions against Shandong Shouguang Luqing Petrochemical in March and Shandong Shengxing Chemical in April have also begun to deter other, larger independent Chinese refiners from buying Iranian crude, three of the sources said. About five plants in the refining hub of Shandong province have halted purchases of Iranian oil since last month, worried about being hit by sanctions, two trading executives said. That wariness is the main reason discounts for Iranian Light have widened to $2.30-$2.40 a barrel against ICE Brent from about $2 a month ago, the executives and another source said. Among the inconveniences faced by the two sanctioned teapots, state-run Shandong Port Group, the main port operator in the province, has denied entry to vessels loaded with crude they have purchased, five trade sources said. That follows the port group's January ban on port calls by U.S.-sanctioned tankers. Shandong Port Group and Shengxing did not respond to requests for comment. A Luqing executive declined to comment. Large state banks have also stopped providing Luqing with operational capital for purchasing crude, forcing it to work with smaller banks, four of the sources said. The sources declined to be identified due to the sensitivity of the matter. Beijing says it opposes unilateral sanctions and defends as legitimate its trade with Iran, which ships about 90% of its oil exports to China. However, Chinese customs data has not shown any oil shipped from Iran since July 2022, with Iranian crude imports instead labelled as originating from Malaysia or other countries. SHIPPING, SALES HEADACHES The Shandong Port Group's banning of cargoes for the two refineries has forced them to discharge at other ports, according to three sources. In one case, the tanker Bei Hai Ming Wang carrying oil for the Shengxing refinery was rejected when it sought to land at the Laizhou port, controlled by Shandong Port Group, around April 21, according to a source familiar with the matter. It eventually unloaded on May 2 at the privately owned Wantong Crude Oil Terminal in neighbouring Dongying, data from analytics firm Vortexa showed. In another sign of trading disruption from the sanctions, two Asia-based oil product traders who had previously dealt with Luqing said they stopped doing so after it was sanctioned. In addition, no shipments of gasoline blendstock have been recorded since the end of March out of Laizhou port, used by Luqing for most of its blendstock exports, Kpler and LSEG shiptracking data showed. That contrasts with the first three months of this year when 83,000 metric tons (701,000 barrels) of methyl tertiary butyl ether, a key gasoline blendstock export, were shipped from Laizhou, accounting for 15% of China's total outflow of the blendstock. State giant CNOOC stopped supplying crude to Shandong Haihua Group's 40,000 barrel-per-day refinery, operated by Luqing, shortly after the U.S. sanctions were announced, three trade sources and a Shandong-based Chinese oil market consultant said. CNOOC did not respond to a request for comment. Calls to Haihua went unanswered. The two teapots have also begun selling product through new entities, according to seven trade sources, with Luqing using Shouguang Jiaqing Petroleum Sales and Shengxing selling via Shandong Xuxing Petrochemical. Calls to the two entities seeking comment went unanswered.
Reuters
08-05-2025
- Business
- Reuters
Exclusive: US sanctions on China refiners over Iran oil disrupt operations, sources say
SINGAPORE, May 8 (Reuters) - Recent U.S. sanctions on two small Chinese refiners for buying Iranian oil have created difficulties receiving crude and led them to sell product under other names, sources familiar with the matter said, evidence of the disruption that Washington's stepped-up pressure is inflicting on Tehran's biggest oil buyer. The targeting of independent refiners, known as teapots, marked an escalation in Washington's efforts to cut off Tehran's export revenue as President Donald Trump seeks to pressure Iran into a deal over its nuclear programme. Washington's sanctions against Shandong Shouguang Luqing Petrochemical in March and Shandong Shengxing Chemical in April have also begun to deter other, larger independent Chinese refiners from buying Iranian crude, three of the sources said. About five plants in the refining hub of Shandong province have halted purchases of Iranian oil since last month, worried about being hit by sanctions, two trading executives said. That wariness is the main reason discounts for Iranian Light have widened to $2.30-$2.40 a barrel against ICE Brent from about $2 a month ago, the executives and another source said. Among the inconveniences faced by the two sanctioned teapots, state-run Shandong Port Group, the main port operator in the province, has denied entry to vessels loaded with crude they have purchased, five trade sources said. That follows the port group's January ban on port calls by U.S.-sanctioned tankers. Shandong Port Group and Shengxing did not respond to requests for comment. A Luqing executive declined to comment. Large state banks have also stopped providing Luqing with operational capital for purchasing crude, forcing it to work with smaller banks, four of the sources said. The sources declined to be identified due to the sensitivity of the matter. Beijing says it opposes unilateral sanctions and defends as legitimate its trade with Iran, which ships about 90% of its oil exports to China. However, Chinese customs data has not shown any oil shipped from Iran since July 2022, with Iranian crude imports instead labelled as originating from Malaysia or other countries. The Shandong Port Group's banning of cargoes for the two refineries has forced them to discharge at other ports, according to three sources. In one case, the tanker Bei Hai Ming Wang carrying oil for the Shengxing refinery was rejected when it sought to land at the Laizhou port, controlled by Shandong Port Group, around April 21, according to a source familiar with the matter. It eventually unloaded on May 2 at the privately owned Wantong Crude Oil Terminal in neighbouring Dongying, data from analytics firm Vortexa showed. In another sign of trading disruption from the sanctions, two Asia-based oil product traders who had previously dealt with Luqing said they stopped doing so after it was sanctioned. In addition, no shipments of gasoline blendstock have been recorded since the end of March out of Laizhou port, used by Luqing for most of its blendstock exports, Kpler and LSEG shiptracking data showed. That contrasts with the first three months of this year when 83,000 metric tons (701,000 barrels) of methyl tertiary butyl ether, a key gasoline blendstock export, were shipped from Laizhou, accounting for 15% of China's total outflow of the blendstock. State giant CNOOC stopped supplying crude to Shandong Haihua Group's 40,000 barrel-per-day refinery, operated by Luqing, shortly after the U.S. sanctions were announced, three trade sources and a Shandong-based Chinese oil market consultant said. CNOOC did not respond to a request for comment. Calls to Haihua went unanswered. The two teapots have also begun selling product through new entities, according to seven trade sources, with Luqing using Shouguang Jiaqing Petroleum Sales and Shengxing selling via Shandong Xuxing Petrochemical. Calls to the two entities seeking comment went unanswered.
