On October 6, 2023, Chinese refineries purchased at least 12 million barrels of crude oil from Iraq and Qatar from trading companies Mercuria, Totsa, and Trafigura. One informed source estimated the total volume of purchases to be between 15 to 20 million barrels.
Details of Purchase and Pricing
These shipments have been sold at prices ranging from $12 to about $20 per barrel above the Brent crude index and based on delivery at destination. The majority of the purchases include heavy and medium Basra crude oil from Iraq, which are considered some of the cheapest grades of oil in the Middle East. According to available reports, the reduced supply from some Chinese refineries has directed them towards purchasing high-sulfur Basra oil; oil that typically received less attention compared to cheaper Iranian oil and Russia's ESPO oil, which has a higher yield in diesel production.
Read more: SFL Company is selling tanker shipments to Trafigura
Impact of Maritime Blockade on Iran's Oil Exports
Before the war, Iranian oil was the main source for independent refineries in China, including small refineries known as "teapot" refineries in Shandong province, but the U.S. maritime blockade has limited their access to this source. According to Bloomberg, at least 50 tankers, mostly carrying Iranian crude oil, have been stranded along the Chinese coast. Meanwhile, state-owned Chinese refineries have purchased the majority of Russian oil available in the market, which has increased the cost of oil supply for independent refineries.
In recent weeks, the U.S. has been seeking to limit the financial lifelines of the Iranian government. The maritime blockade, preventing the export of Iranian oil and blocking the routes for transferring oil revenues, is among the key points of this campaign. The abundant supply and the possibility of quick delivery have made Iraqi oil a new pricing benchmark for independent Chinese refineries.
Purchasing Crude Oil from Qatar and Other Regions
Informed sources also reported that Hongrun and Shenchi companies have purchased three million barrels of Qatar's "Al-Shaheen" crude oil for delivery in early November. Independent Chinese refineries also bought over 20 million barrels of crude oil from West Africa, Canada, and Colombia from late August to early September; an action that followed the reduction of Iranian oil supply and the resumption of the U.S. maritime blockade.
Kepler's data shows that Iran's oil imports to China in September were nearly halved compared to the same period last year, reaching 590,000 barrels per day, the lowest level since January 2023. Kepler also reported that the volume of Iranian crude oil stored on tankers outside the blockade zone has decreased from 100 million barrels in late July to 45 million barrels.
According to this report, Iran did not export any crude oil in September for the first time since Kepler began monitoring the country's oil exports in 2013. U.S. Treasury Secretary Scott Basset announced on October 3 that the Iranian government would not have any oil shipments at sea this week and would not generate revenue from this route.
Read more: KBR received the oil field upgrade project from Aramco · Eastern tanker contract destined for China on October 6, 2023
