Key facts
- Iranian crude prices have climbed due to reduced supply to China.
- Deliveries for September and October have fallen compared to earlier months.
- The US has intensified its blockade on Iran's oil shipments since mid-July.
- US President Donald Trump has threatened secondary sanctions on trading partners.
- Available Iranian crude in floating storage has significantly decreased.
Iranian crude oil prices have seen a significant increase as the United States intensifies its blockade, leading to a sharp reduction in available cargoes for Chinese buyers. Deliveries scheduled for September and October have notably decreased compared to previous months, with sellers having already placed much of the earlier shipped crude.
This tightening of supply has caused Iranian oil, previously offered at discounts, to now command premiums. The situation follows the US re-imposition of its blockade on Iran's shipping and ports on July 13, aiming to cut off the country's primary source of hard currency. This action compounds earlier losses from wartime strikes on Iran's energy infrastructure.
According to data from Kpler, the total volume of Iranian crude outside the Persian Gulf and Gulf of Oman has fallen to approximately 83 million barrels from over 100 million barrels before the blockade was reinstated. A substantial portion of this, around 40 million barrels, is held in floating storage near Singapore. Market participants indicate that only a small fraction of these offshore barrels remain unsold, suggesting buyers could face virtually no new Iranian supplies for late-September delivery onwards.
The US blockade has been effective in stifling exports from Kharg Island, Iran's key export terminal. Adding to the pressure, US President Donald Trump has threatened secondary sanctions against countries continuing to trade with Iran, a move that has put China's independent refiners, the largest buyers of Iranian crude, on alert.
China remains the primary destination for Iranian crude, despite years of US sanctions. However, with Iranian availability dwindling, Chinese refiners are exploring alternative feedstocks such as Russian Urals crude or fuel oil, as supplies of ESPO have also been sold out. Imports of Iranian oil by China have seen a decline from a year ago, with August intake dropping significantly.