The price of Iranian Light for delivery in July into China has been cut to a discount of $1 per barrel to the ICE Brent benchmark, anonymous traders participating in the market told Bloomberg on Monday.
This compares with a premium of up to $2 per barrel in the previous two months.
The independent Chinese refiners, the so-called teapots, have been the biggest buyers of Iran’s sanctioned crude in recent years, taking about 90% of all Iranian exports.
But demand for Iranian oil in its biggest export market has waned in recent weeks, as imports in China slump to multi-month lows and the independent refiners reduce run rates amid high import costs that deepen their losses.
Despite the massive loss of supply from the Middle East, Chinese teapots are reducing intake of Iranian and Russian crude as prices remain too high for them and drag them into further losses.
Hence, the price correction for the Iranian and Russian crude offered to Chinese buyers in recent days.
Many of the teapots have been operating at near-normal rates since the Iran war began as the Chinese authorities ordered sufficient domestic fuel supply.
But in recent days, it appears that China has allowed some independent refiners to reduce processing rates amid mounting losses as Chinese crude and fuel stockpiles remain comfortably high despite the Middle East crisis.
As inventories are sufficient enough, also due to China’s slashed exports, the Chinese authorities now seem to be inclined to relax the policy, at least for some of the struggling private refiners.