Key facts
- China's independent refiners are likely to increase Iranian crude oil purchases in August.
- Stockpiles in Shandong have fallen to an estimated 360 million barrels, an eight-month low.
- July saw an estimated drawdown of 35 million barrels, the largest monthly decline since 2016.
- Total Chinese crude oil imports rose 22% in July from June levels.
- Millions of barrels of Iranian crude were positioned for Asian shipment after a U.S. blockade was lifted.
China's independent refiners, known as 'teapots,' are anticipated to significantly increase their purchases of Iranian crude oil in August. This shift is driven by a substantial drawdown in domestic stockpiles, which have reached an eight-month low of approximately 360 million barrels in Shandong province. The July inventory reduction was estimated at 35 million barrels, marking the largest monthly decline since Energy Aspects began tracking this data in 2016. This strategic move follows a period where these refiners limited imports and drew on reserves amidst high international prices and a broader Chinese policy to reduce crude imports. The country had previously amassed over 1.3 billion barrels in reserves, allowing it to absorb price volatility and contribute to capping global oil prices. Total Chinese crude imports rebounded in July with a 22% increase from June, averaging 8.45 million barrels per day. The refiners' increased demand for Iranian oil is further supported by the availability of crude that exited the Strait of Hormuz during a window when U.S. sanctions on Iranian exports were temporarily eased.