Offers of Iranian crude oil to Chinese buyers have significantly decreased, and prices have risen sharply this week as a result of the US blockade on Iran's shipping and ports. This comes as the US is set to announce further sanctions, aiming to cut off oil sales, Iran's primary source of hard currency. The number of available Iranian oil cargoes for September and October delivery has declined compared to July and August. This reduction is attributed to existing barrels on ships having been sold and the inability of Iranian tankers to enter or exit the Persian Gulf due to the blockade.
The blockade has led to a dramatic shift in pricing. Iranian crude, typically sold at discounts, is now being offered at premiums to ICE Brent futures, with some sources citing a premium of about $2 per barrel. Just earlier this week, Iranian Light was offered at a discount of around $3 per barrel. This situation is particularly impacting China's independent refiners, known as "teapots," located in Shandong province, which account for roughly one-fifth of China's refining capacity and are major buyers of sanctioned oil. These refiners are now exploring alternatives like Brazil's Lapa crude and Iraq's Basrah crude.
Iran's oil exports have seen a substantial drop since mid-July. Ship-tracking data from Kpler shows no visible supertanker crossings of the Strait of Hormuz with Iranian crude since then, although many vessels turn off their transponders. Floating storage of Iranian crude outside the US blockade zone has decreased from about 105 million barrels to approximately 80 million barrels. Experts estimate that only about 30 million barrels of Iranian crude remain in Asian waters, half of typical levels. Muyu Xu, a Kpler analyst, noted about 40 million barrels in Malaysian waters, mostly already promised to buyers, suggesting virtually no new Iranian supplies for late-September onward if the blockade persists.
Chinese imports of Iranian oil have fallen from an average of 1.4 million barrels per day last year to 785,000 barrels per day in June, the lowest since February 2023. While July imports likely rose slightly to 823,000 barrels per day, August intake has dropped to 534,000 barrels per day. The US Treasury Secretary Scott Bessent has threatened Iran with the "toughest sanctions in history," to be detailed soon, to pressure Iran to reopen the Strait of Hormuz. Despite these threats, a source at a Chinese refinery suggested that new sanctions might not significantly deter purchases, as previously sanctioned refiners have continued to process Iranian oil. China, the world's largest crude importer, typically buys over 80% of Iran's shipped oil, and Beijing has stated its rejection of unilateral sanctions.
