China’s Iranian Crude Imports Surge, Stockpiles Climb
Yaorusheng/Shutterstock
China’s imports of Iranian crude spiked in June by around 500,000-600,000 barrels per day from the previous month to over 1.71 million b/d, with significant volumes landing at ports in the first three weeks of the month.
Improved refining margins helped bolster demand from China’s smaller independent refiners. But the surge of Iranian crude arriving in June was mostly fueled by traders speculating that regional instability could disrupt Iranian and other Mideast crude supplies, causing demand for Iranian crude to jump, a Chinese market source said.
This stemmed from concerns that Israel, which started an intensive bombing campaign against Iran on Jun. 13, would target Iran’s crude export facilities on Kharg Island, which is thought to handle around 90% of Iranian crude exports.
June imports, tracked by Emma Li at data analytics firm Vortexa, were not far off the record high of more than 1.8 million b/d of Iranian crude that China landed in March. And inflows were significantly higher than the 1.1 million-1.2 million b/d that arrived at Chinese ports in May, based on Vortexa data.
China landed particularly high volumes of Iranian crude in the first three weeks of June, according to three market sources.
A temporary increase in refining margins may also have sharpened demand from smaller independent refiners, or teapots, for Iranian and other crude, said a Chinese refiner source and a trader. Iranian volumes also flow to the 400,000 b/d private Hengli refinery and 320,000 b/d private Shenghong refinery.
Shrinking Appetite, Storage
However, as Brent futures prices spiked due to the attacks, Chinese appetite for Iranian crude actually diminished as cargoes became more expensive, said a second Chinese refiner source.
Earlier, Iranian crude had sold at a discount of around $3 per barrel to ICE Brent futures on a China-delivery basis, he added.
June demand from smaller Chinese independent refiners was also softened by planned maintenance at four refineries in Shandong province starting in late May, said another Chinese market source.
As such, most of the Iranian crude arriving in June likely went into storage, he added.
Accordingly, onshore inventories of unsold Iranian crude have risen to “very high” levels, likely giving refiners leverage to push for lower spot price differentials, said Vortexa’s Li.
With the Israel-Iran ceasefire holding in the Mideast for now, Brent futures prices have also since fallen significantly.
And Chinese demand for Iranian crude appears to be recovering, said a third Chinese refiner source.
Offshore floating storage of Iranian crude remains relatively stable, Li noted. Typically, there are around 20 very large crude carriers floating and storing around 40 million bbl of Iranian crude.