CHINA BUYING IRANIAN OIL

S&P GLOBAL- Apr 11, 2025 - China's independent refiners continue to purchase Iranian crudes at high levels, despite the recent US sanctions on Iran's energy sector, refinery and trade sources told.

On April 10, the US Department of the Treasury sanctioned nearly 30 oil tankers involved in shipping Iranian crudes, as well as a Chinese storage terminal.

The China-based Guangsha Zhoushan crude oil and petroleum storage terminal, connected to a nearby refinery complex, is the second Chinese terminal sanctioned since March for handling Iranian cargoes.

The 800,000-b/d private refinery also uses the terminal to import crudes, primarily from the Middle East.

Sources suggest that the sanctions on the terminal will not affect crude imports by the refining complex, as it handles only a small portion of its overall supply. Platts data showed that the terminal accounted for just 19% of the complex's crude imports in the first quarter of 2025.

The refinery operated at around a 100% utilization rate in early April, largely unchanged from March, according to close sources with knowledge of the matter.

Meanwhile, most small-sized independent refineries continue purchasing Iranian crude cargoes due to their relatively lower cost compared with other grades, along with a few deals involving regular crudes such as Brazil's Frade and Brunei's Champion.

"Brazilian crudes are relatively high in value -- around $5/b [against ICE Brent on a delivered basis] -- which is still too expensive to accept," an independent refinery source said.

The latest deal for Champion crude cargoes was heard to have been concluded at an even higher price of around $7/b, according to sources.

Sanctioned ships

The latest sanctions list mainly included small ships used for shipping oil products. Three ships on the list have previously sailed to China, with the most recent voyage occurring in March.

Two VLCCs, Amor and Virgo, each discharged 2 million barrels of Iranian crudes in March at Shandong ports, while the MR-sized Chil I discharged Iranian condensate a year earlier, S&P Global Commodities at Sea data showed.

Although the latest sanctions have removed some ships from the pool of available tankers, trade sources said that a few new ships have recently joined the so-called "dark fleet," helping to maintain the overall flow of shipments from Malaysia to China.

Iranian crudes are often transported through ship-to-ship transfers in Malaysian waters before continuing to China, carrying Malaysia-origin certification.

"Supply in the market seems to be sufficient, and we expect volumes for April won't decline significantly," a refinery source said.

Trade sources estimated that Iranian crude imports in April will remain strong at around 1.71 million b/d, as refiners continue to take advantage of steep discounts.

Chinese independent refineries' Iranian crude imports reached an all-time high of 8.07 million mt (1.91 million b/d) in March, Platts data showed. This was up 11.9% from the previous high of 1.71 million b/d in August 2024 and 19.5% higher than February's six-month peak of 1.6 million b/d.

Prices unchanged

Iranian Light crude traded at discounts of $1.50-$1.60/b to ICE Brent Futures on a DES Shandong basis in the week starting April 7, according to refinery sources, largely unchanged from the previous week.

"It is possible that some refiners may increase procurement, as margins have been improving lately," a trade source said.

With margins improving slightly, it was likely that some refineries would purchase more to increase throughputs, according to sources.

Due to plummeting crude prices in the international market, refining margins for processing imported crudes at independent refineries rose 129.26% week over week to Yuan 716.90/mt ($13.40/b) as of April 10, according to OilChem, providing further incentive for refiners to ramp up operations.

Data from OilChem showed that Chinese independent refineries' average utilization rate rose 1.06 percentage points to 47.8% as of April 10, supported by improved refining margins.

-----