Iran has quietly moved record amounts of crude oil to top client China in recent months, while India’s state refiners have added Iranian oil to their annual import plans on the assumption that U.S. sanctions on the OPEC supplier will soon ease, according to six industry sources and Refinitiv data.
The National Iranian Oil Company (NIOC) has started reaching out to customers across Asia since Biden took office to assess potential demand for its crude, said the sources, who declined to be named because of the sensitivity of the matter.
“They talked to us. They said: ‘very soon they hope to resume oil supplies.’ We said:
Restored Iranian supplies to India, the world’s third-largest crude importer, could reduce demand for spot cargoes, which has climbed recently after Iraq cut supplies and Kuwait reduced the duration of some contracts.
India, which is hurting from the recent sustained recovery in global crude prices, expects Iranian supplies to return to the market in 3 to 4 months, a government official said.
Another Indian refiner said they had been told by NIOC officials that a formal agreement on crude supply would be signed after Iran’s elections in June. NIOC has also reached out to other Asian customers.
“Recently NIOC called us, asking about demand,” said a trader at an East Asian refiner. “It looks like Iran is getting ready to return to the market.”
Another refining source said the talks were “very initial” and that NIOC wanted to know whether the company would resume Iranian oil purchases. The sources declined to be named because of the sensitivity of the matter.
Unlike India, China never completely halted Iranian oil imports. Iran moved about 17.8 million tons (306,000 barrels per day) of crude into China during the past 14 months, with volumes reaching record levels in January and February, according to Refinitiv Oil Research.
Of these, about 75% were “indirect” imports identified as oil from Oman, the United Arab Emirates or Malaysia, which entered China mainly via ports in eastern Shandong province, home to most of China’s independent refiners, or Yingkou port in northeastern Liaoning province.
The remaining 25% of imports were marked as official purchases for China’s Strategic Petroleum Reserves, Refinitiv said, as Beijing maintains a small purchase volume despite U.S. sanctions.
Without commenting directly on the oil transactions, the Spokesman’s Office of China’s Foreign Ministry said: “Iran is a friendly nation to China and the two nations have maintained normal exchanges and cooperation. The cooperation between China and Iran under the framework of international laws is both reasonable and legitimate, and deserves respect and protection.”
NIOC declined to comment. An official at the country’s Oil Ministry said,”When the unjust U.S. sanctions are lifted, Iran will be able to sell its oil to any country, and I can assure you that many contracts will be signed.”
Geneva-based tanker tracker Petro-Logistics said Iranian oil loadings in January exceeded 600,000 bpd for the first time since May 2019, a sign that the end of Donald Trump’s term may be changing buyer behavior.
Indirect shipment arrivals in February, including those waiting to discharge off Chinese ports, reached nearly 850,000 bpd, beating the daily record of 790,000 bpd set in April 2019, according to Refinitiv and Chinese customs data.
Chinese customs data showed on Sunday that crude imports rose 4% annually in the first two months of this year. It will release details for the breakdown by country of origin this month.
“Iranian stuff started to slip into Shandong from late 2019... started with some cash-stripped refiners which processed oil first before paying for the cargo,” said an independent Chinese trader familiar with some of the transactions.
Most of these transactions were settled in Chinese currency or euros to circumvent U.S. scrutiny, the trader said.
The record imports have weighed on prices for competing medium and heavy grades from other Middle East producers, traders said.
“While it does not seem that the sanction will be lifted anytime soon, Iran has resurfaced,” another trade source said.