China’s Buying of Iranian Oil at Decade High

Chinese imports of sanctioned Iranian oil are running at the highest level in at least a decade, according to Kpler, as increasing prices boost Iranian crudes attractiveness.

• China will import around 1.5m b/d of Iranian crude in August, according to Kpler, compared to an average of 917k b/d from Jan-July. This would also be the highest level since Kpler’s records began in 2013.
• Most of the Iranian crude is purchased by independent refineries in the Shandong province.
• S&P Commodity Insights put imports of Iranian crude from China’s independent refineries at around 6.28mn mt in July, up by 13% from June.
• The spike in crude prices since late June is forcing buyers to procure cheaper alternatives. Iranian crude is trading around $10/b below Dated Brent, according to Bloomberg. This also makes it cheaper than Russian grades.
• “The higher flat prices go, the better risk-reward ratio for Shandong refiners to look for Iranian crude,” said Homayoun Falakshahi, a senior oil analyst at Kpler.
• Much of the imported crude is being disguised as bitumen to avoid using up crude oil import quotas. A probe by Chinese authorities into bitumen exports starting in April has recently been relaxed.