Key facts
- Iranian crude prices have climbed due to reduced supply to China.
- China's imports of Iranian crude in August fell to an estimated 534,000 bpd from 823,000 bpd in July.
- The U.S. blockade on Iranian oil exports has been intensified since mid-July.
- US President Donald Trump has threatened secondary sanctions against countries trading with Iran.
- Available Iranian crude in floating storage has significantly decreased, impacting future supply.
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. According to data from Kpler, China's estimated imports of Iranian crude oil in August fell to about 534,000 barrels per day (bpd), down from an estimated 823,000 bpd in July. The U.S. blockade is preventing new supply from Iran from leaving the Persian Gulf, while Iranian oil volumes on water outside the Gulf of Oman are shrinking fast.
US President Donald Trump's warning that any country extending a 'lifeline' to Iran could face 'TREMENDOUS Economic Consequences' is making China's independent refiners uneasy about potential stricter sanctions enforcement. The availability of Iranian crude cargoes has dwindled in the past few weeks, with only a handful of laden tankers not being taken by buyers. The number of offers for September and October delivery has also collapsed.
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.