AiBotSHANGHAI/WASHINGTON – Chinese independent refiners are buying Iranian oil at premiums to Brent for the first time in years, seeking to capitalize on higher refining margins at home. This move marks a shift in their purchasing behavior, which had previously been influenced by global sanctions and trade tensions.
According to sources close to the matter, Chinese independent refiners have paid $1.50 to $2 a barrel above ICE Brent for the Iranian oil, reversing a $10 per barrel discount observed before the conflict. This development is particularly significant given Iran’s strategic location as one of China’s key oil suppliers.
At least two major refiners in Dongying, a key hub for independent refiners in the eastern Shandong province, have made these purchases. The oil cargoes are set to be delivered this month, with the exact timing and volumes still subject to market conditions.
China’s independent refining sector has experienced a resurgence in recent months, fueled by improvements in refining margins. Beijing has lifted ceiling prices for retail gasoline and diesel, resulting in increased fuel prices that have contributed to these enhanced margins. Concurrently, lower crude costs, thanks to the reduced global demand for oil, have further boosted refiners’ profits.
The return to Iran oil by Chinese independent refiners is also a reflection of China’s efforts to diversify its crude supplies amidst ongoing tensions with the West over issues such as Taiwan and Xinjiang. The Chinese government has sought to establish stronger energy partnerships with countries like Iran, with whom Beijing shares a history of long-standing diplomatic and economic ties.
The impact of this development on the global oil market and international trade dynamics will be closely watched. China is the world’s second-largest oil consumer, making any shifts in its crude imports a matter of significant importance for global oil prices and supplies.
The move by China’s independent refiners to buy Iranian oil at premiums to Brent also adds complexity to global price dynamics. If this trend were to continue, it could lead to higher oil prices for consumers, exacerbating existing inflationary pressures in several countries.
Chinese refiners’ purchases of Iranian oil have sent a signal to other international buyers that they are now willing to pay premiums for Iranian barrels. This may further challenge the global sanctions regime imposed on Iran, as international oil buyers increasingly see the benefits of doing business with the country.