China Is Buying the Most Iranian Oil in a Decade, Kpler Says (Bloomberg) -- Chinese imports of sanctioned Iranian oil are running at the highest level in at least a decade as rising global prices make the discounted crude more attractive, according to data intelligence firm Kpler.
Iran has been ramping up oil exports this year as it becomes more geopolitically assertive, with most of the shipments heading to China. The easing of a probe by Beijing into imports of bitumen mixture, which Iranian crude is sometimes disguised as, also appears to be speeding the passage of cargoes through customs, according to traders who are involved in the market.
The world’s biggest oil importer will take about 1.5 million barrels a day of crude from Iran this month, according to an estimate from Kpler. That compares with an average of 917,000 barrels a day in the first seven months of the year and would be the highest in the Kpler figures that go back to 2013.
A jump of around a fifth in global benchmark Brent crude since late June is raising demand for the cut-price oil, much of which is bought by independent refiners clustered in Shandong province. Iran’s two main grades are currently trading at discounts of more than $10 a barrel to Brent, traders said, and are considerably cheaper than Russian varieties.
“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. The oil is often classified as coming from Malaysia in Chinese government data and can be sometimes reported as diluted bitumen mixture if it’s mixed with heavier Venezuelan crude, he said.
The independent refiners, or teapots, often disguise Iranian crude as feedstocks such as bitumen mixture to avoid using up their oil import quota.
The government launched an investigation into imports of the feedstock in Shandong in April, which had been holding up flows of heavier crudes from Iran and Venezuela. The reasons for the probe are still unclear, but it’s recently been eased, according to traders.
Meanwhile, Vortexa Ltd., another company that monitors flows of oil into China, said it sees the country taking about 1 million barrels a day of Iranian crude this month, compared with a record 1.3 million barrels in December. The contrasting estimates from the tanker-tracking firms may be due to different methods in analyzing the flows.
“Crude import quotas and uncertainty on non-crude import standards are holding China’s imports in August in check,” said Emma Li, an analyst at Vortexa. Some of the increase in Iranian oil exports may also go into floating storage, she said.
The industry relies on figures from companies like Kpler and Vortexa as purchases of Iranian oil typically aren’t included in the Chinese customs data, which doesn’t show any imports since June 2022.
Iranian crude is often classified as diluted bitumen mixture and, more recently, “other heavy oil.” Imports of other heavy oil surged by around 88 times in June from May, while purchases of bitumen mixture quadrupled, according to the customs data. Malaysia is the biggest supplier of both categories.