China Sets New Record for Iranian Oil Imports

Record-Breaking Oil Imports

China's imports of Iranian oil are set to reach an all-time high of 1.75 million barrels per day (b/d) this month, according to data from Kpler. This surpasses the previous record of 1.66 million b/d set in October 2023, and is almost 50% higher compared to 1.24 million b/d last month.

Increased Shipments

Shipments into Rizhao and Dalian have significantly increased month on month, as reported by Muyu Xu, an analyst with Kpler. "Chinese teapots see refining margins slightly improving, they now have stronger motivation to ramp up production and therefore need more feedstock," she explained. Flows into Lanqiao/Rizhao and Dalian nearly doubled month on month to 342k b/d and 132k b/d, respectively.

China's Growing Appetite for Iranian Oil

Last week, Bloomberg reported that China imported a record volume of crude from Malaysia in July, indicating a renewed appetite for cheaper Iranian oil as refiners grapple with lower margins due to an economic slowdown. The world's largest crude importer took 6.21 million tons from Malaysia in July, equivalent to 1.47 million barrels a day, or nearly triple the average daily production from the Southeast Asian nation throughout 2023.

Why is this Important?

This is a key leading indicator because the seas off Malaysia have long been a hub for transferring crude and oil products from one tanker to another, often to conceal the country of origin, especially from Iran. Officially, China hasn't purchased Iranian barrels since June 2022, according to government data. However, unofficially, it is buying record amounts.

Iranian Oil: The Cheapest Option

Iranian oil, which the US once sanctioned, has become the cheapest option for Chinese buyers, even cheaper than Russia. More independent refiners are seeking barrels from the OPEC producer to boost their margins, according to market traders. Iranian Light was last offered at a discount of $6 a barrel to ICE Brent, compared to a discount of less than a $1 for comparable crude from Russia.

Major Buyers of Iranian Crude

Importers registered in China's Shandong province were the biggest buyers of Iranian crude, accounting for over 70% of the volume, according to customs data. In total, eight Chinese regions including Liaoning and Henan imported oil from the Southeast Asian nation, the most since October 2023.

Bottom Line

These record-breaking imports of Iranian oil by China indicate a shift in global oil trade dynamics. As economic conditions fluctuate, countries are seeking more cost-effective options to maintain their energy needs. The question remains, however, how will this impact international relations and the global oil market in the long run? We'd love to hear your thoughts on this matter. Don't forget to share this article with your friends and sign up for the Daily Briefing, delivered every day at 6pm.