China's Crude Imports from Iran Decline Amid Sanctions and Refinery Upgrades

According to a recent report from bloomberg,Iran’s oil exports to China are on the decline due to escalating sanctions that disrupt shipments and a decrease in refinery demand from the world’s largest importer of fossil fuels. Preliminary figures indicate that in May, Iran’s crude and condensate deliveries to China averaged just over 1.1 million barrels per day, marking a significant drop of about 20% compared to the same month last year, as estimated by Vortexa Ltd., which relies on ship-tracking data. These numbers may fluctuate as final shipment tallies are completed, especially since many tankers have started turning off their transponders.

The United States and its allies have intensified efforts to limit Iranian oil exports in response to concerns regarding Iran’s nuclear ambitions. Negotiations between Washington and Tehran appear stalled at this point. Interestingly, official Chinese statistics do not reflect any imports from Iran; instead, much of this crude is often rebranded as originating from Malaysia after being transferred at sea near Southeast Asia.

Emma Li, a senior market analyst at Vortexa, noted that tightening US sanctions are putting pressure on supply chains and raising alarms about flow stability.Additionally, there’s been weaker demand attributed largely to postponed seasonal maintenance at refineries—a situation expected to linger into July.China’s self-reliant refiners—often referred to as “teapots”—are currently the primary purchasers of Iranian crude due to its attractive pricing which helps them manage their typically narrow profit margins. Though, these refiners are operating at near-record low processing rates right now. Earlier stockpiling has also reduced their immediate need for new purchases in may.

Moreover, lower prices for competing crudes like Russian varieties such as Sokol and Novy Port are making it even harder for Iranian barrels to compete effectively in the market according to Li’s analysis. This shift highlights how geopolitical tensions can substantially impact global oil dynamics while also showcasing how market players adapt amidst changing circumstances.