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16 August 2023

China's Crude Oil Imports from Iran Set to Reach 10-Year Peak in August

China's imports of Iranian crude oil are set to hit a decade-high in August, climbing to 1.5 million barrels per day.

Increased competition with India for cheap Russian oil has pushed China to boost its imports from Iran.

Russia's pledge to cut its exports will likely push more private Chinese refiners to buy Iranian oil while state-run refiners buy from elsewhere.

China is expected to import as much as 1.5 million barrels per day (bpd) of crude oil from Iran in August, the highest since 2013, per estimates from data intelligence firm Kpler cited by Bloomberg.

During the period January to July 2023, China received on average 917,000 bpd of oil from Iran, according to Kpler's estimates.

The world's largest crude oil importer, China, has been ramping up purchases of cheaper Iranian crude this year as competition with India for cheap Russian crude supply has intensified. Earlier this year, many private Chinese refiners in the Shandong province started buying increasing volumes of Iranian crude as competition for Russian oil from China's major state-held refiners and from Indian buyers has made Moscow's barrels relatively more expensive.

There isn't official data on Iranian imports into China, so the market relies on tanker-tracking companies that aim to capture the true picture of how much of Iran's oil, sanctioned by the U.S. and going to very few destinations these days, is being shipped to China.

Commenting on China's crude oil imports in July, analysts at Vortexa said last week that private Chinese refiners, the so-called teapots, are likely to boost imports of Iranian oil, especially after Russia has pledged to reduce the volume of its oil exports this month and next.

"With lower Russian crude supplies, Chinese teapot refiners that largely boosted Russian grades imports since Q2 last year, are expected to lean towards the deeply discounted Iranian barrels or other heavy feedstocks, as Shandong partially re-allowed non-crude imports recently," Emma Li, China Market Analyst at Vortexa, said.

"State-run refiners, on the other hand, will likely import more crude from West Africa and the Americas, as attractive light-sweet crude margins encourage spot purchases against rising Saudi and Russian crude prices."

Meanwhile, Iran's oil exports have recently jumped to a five-year high of 1.4 million bpd, and the Islamic Republic is looking to boost its oil production to 3.5 million bpd by the end of September.