China Hoards Sanctioned Oil... Expands Imports of 'Bargain' Iranian Crude Oil

Iranian Crude Oil Cheaper Than Russian Oil
China's August Imports of Iranian Oil Expected to Reach 10-Year High

As international oil prices soar, it has been revealed that China is significantly increasing its imports of Iranian crude oil, which is under U.S. economic sanctions.

[Image source=Yonhap News]

On the 16th, Bloomberg News cited market research firm Kpler, estimating that China will import 1.5 million barrels of crude oil per day from Iran in August. This far exceeds the average daily Iranian crude oil imports of 917,000 barrels from January to July this year, marking the largest volume in 10 years since 2013.

As the price of Brent crude oil, the international benchmark, surged, demand from Chinese refiners for relatively cheaper Iranian crude oil increased significantly. As of the 15th, Brent crude oil was priced at $84.89 per barrel, up 12.6% since the end of June. In contrast, Iranian crude oil was reportedly traded at more than $10 per barrel lower than Brent crude. Oil market traders said, "It is even cheaper than Russian crude."

Years of sustained U.S. sanctions against Iran have led to a drop in Iranian crude oil prices. Previously, in May 2018 during the administration of former President Donald Trump, the U.S. unilaterally withdrew from the Iran nuclear deal, citing Iran’s inability to halt its nuclear development, and reinstated economic sanctions including a ban on Iranian crude oil imports. Subsequently, the U.S. imposed sanctions on countries trading with Iran, and several Chinese companies were added to the sanctions list. However, China has been strengthening cooperation with Iran, and private refineries located in Shandong Province, known as "Tipot," have been secretly importing low-priced Iranian crude oil.

These private refineries disguise Iranian crude oil as supply materials such as bitumen blends to avoid exhausting China’s government import quotas. According to oil market insiders, the Chinese government has also relaxed inspections on Iranian crude oil disguised as bitumen blends, speeding up customs clearance.

Currently, Iranian crude oil is classified as Malaysian crude oil in Chinese government data or reported as diluted bitumen blends mixed with Venezuelan crude oil. Recently, there has been an increase in cases where it is classified as other heavy oils. According to Bloomberg, China’s imports of other heavy oils and bitumen blends in June increased 88 times and 4 times respectively compared to the previous month. The media also reported that Iran’s crude oil exports have significantly increased this year as a result.

Homayoun Falakshahi, senior crude oil analyst at Kpler, analyzed, "The higher the oil prices rise, the greater the risk compensation ratio for Shandong refineries seeking Iranian crude oil."

This content was produced with the assistance of AI translation services.