Alex Lawler and Chen Aizhu

SINGAPORE/LONDON – China’s Iranian oil imports have been above half a billion barrels per day for the past three months. Ship-tracking and traders said that buyers believe getting cheap crude is more valuable than any sanctions being lifted.

The Chinese continued to buy Iranian crude oil this year in spite the fact that sanctions would have allowed Washington to remove all those who break them from the U.S. economic system.

The Obama administration is not enforcing sanctions on Chinese people and businesses. This comes amid talks that could bring back a 2015 nuclear agreement that would have allowed Iran to again sell oil freely.

The price of Iranian crude oil fell after a slump in July and June, following a May record low. This was due to buyers running out of import permits. However, independent Chinese refiners have embraced Iran’s less expensive crude once more, according to traders and ship tracking sources.

“Deep discounts on Iranian oil and new importquotas supported Chinese demand from independent refiners,” Emma Li (tanker tracker Vortexa Analytics’ China analyst) said. Furthermore, strong Chinese refining margins added support.

Iran’s oil exports, which now amount to $1.3 billion per month, and most of which are headed to China, generate significant revenue for Tehran. The world powers and Iran are expected to resume negotiations on Nov. 29, in order to put an end to the sanctions imposed on Iran’s oil exports and restore the nuclear accord.

According to Vortexa Analytics data, Iranians arrived in China at 660,000 and 540,000 bpd respectively in August, September, and October. Then, they dropped back to 470,000 in October.

(Graphic: China’s Iranian oil imports rebounded since August on fresh quotas, https://fingfx.thomsonreuters.com/gfx/ce/lgpdwnlgmvo/China%20Iran%20oil%20shipments%20rebounded%20on%20quotas.jpg)

Vortexa data showed that the average three-month shipments were 560,000/month, an increase of 478,000 bpd for June and July. In May, shipments reached a maximum of 730,000 bpd. The year-to-date average was 560,000 bpd.

Others have reported that Vortexa volumes over the past three months were similar to theirs.

While acknowledging the lower volumes than earlier this year, Daniel Gerber, Chief Executive of Petro-Logistics, stated that he would be happy to see higher imports from Iran if China can control recent spike in COVID infection. This is despite high oil prices and OPEC discipline, as well as the discounted oil that’s available. 

China officially has not imported any Iranian oil since 2021. According to customs data, state-owned refiners have been left out of the equation by U.S. sanctions.

Iranian crude accounts for approximately 6% China’s oil imports. Currently, China is receiving Iranian crude as oil from Oman and the United Arab Emirates.

Iranian oil last sold at an average $4-$5/barrel discount, which was about $6-$7 less than Middle East benchmark Oman.

These transactions were also approved by Beijing, which has encouraged both buyers and traders.

A China-based trade executive who was involved in the transaction said that the government did not want to interfere because it saw little risk in allowing these imports. However, he declined to identify himself due to the sensitive nature of the matter.

Reuters received a statement from China’s foreign ministry stating that Iran and China should have normal business relationships. It did not go into details about shipments.

According to the ministry, “China calls on the U.S. government to immediately lift the unlegitimate unilateral sanctions.”

According to a U.S. senior official, Washington has been aware of China’s Iranian oil purchase, according to Reuters. Diplomacy is the “more effective way forward” for Washington to address its concerns.

    The official, however, speaking on condition of anonymity because of the sensitivity of the matter, said the United States had applied sanctions before and would do so again if necessary.

Both the U.S. State Department (USA) and Iran’s Oil Ministry declined to comment.

BONDED TANKS

China’s Iran shipment to Iran in June and July fell as Beijing tightened its quota trading policies and dried up independent refiners import permits.

According to Vortexa, the China-based trading executive and Vortexa, approximately 7 million barrels were transferred into bonded storage in the interim quota to prepare for Beijing’s October release.

These barrels were trans-shipped by October to Shandong Province, China’s autonomous refining center.

According to Michal Meidan (director of the China program at the Oxford Institute for Energy Studies), “Any improvement in nuclear negotiations will result in higher Iranian imports.”

“Renewal flows from Iran will be more probable next year.”