China’s imports of Iranian crude oil plunged by a whopping 470 kbd m/m in April to 1.3 mbd, down from a five-month high recorded in March. While the intensified US sanctions on Chinese refineries and ports seem to have curbed some buying and made new orders more cautious, we expect Iranian crude shipments to China to decline further in May—though still far from the levels the Trump Administration once aimed to eliminate, the Kpler reported.
As part of its “maximum pressure” campaign on Tehran, Washington has sanctioned two Chinese independent refineries—Shouguang Luqing Petrochemical and Shengxing Chemical—along with two oil terminals (Huizhou Huaying and Huangzeshan) and dozens of crude carriers, all within the first 100 days of Trump’s return to office.
The sanction on the first Chinese refinery sent a shockwave through the market, prompting teapots to keep their heads down and shy away from placing new orders. But it didn’t take long for them to return, partly driven by improved refining margins as rival state-owned refiners entered heavy maintenance and the collapse in oil prices. Iranian Light crude is reportedly trading at around -$1.8/bbl against ICE Brent, down from -$0.8/bbl prior to the sanction on Luqing.
Market insiders told Kpler that Shouguang Luqing remains operational and has switched its bank account to facilitate incoming and outgoing payments. However, US sanctions have deterred state-owned and major private trading firms from purchasing refined products from Luqing, while also complicating its direct import of feedstocks.
Refiners remain largely refraining from buying April- and May-arrival cargoes, as they are still sitting on relatively high feedstock inventories. China imported as much as 1.8 mbd of Iranian crude in March, driven by a buying spree in January and February after teapot refiners were granted new crude import quotas and anticipated tightening US sanctions. That said, these refiners will need to return to the market for new cargoes once their stockpiles run low, likely from mid-May onward.