Iran's oil trade with China has fallen after Tehran demanded a price hike

SINGAPORE – Reuters: Oil trade between China and Iran has stalled, trade and refining sources said, as Tehran cut shipping, cut cheap supplies to the world's biggest crude importer and demanded that its biggest customers raise prices.
A decline in Iranian oil supplies, which account for about 10% of China's crude imports and hit a record high last October, could support global prices and reduce profits for Chinese refineries.
The surprise move, which an industry executive described as a “default,” or failure to meet supplies, may have been a reaction to the U.S. lifting sanctions on Venezuelan oil in October, leading to exports of South American products. US and India, resulting in lower exports and higher prices for China.
Five traders familiar with the oil trade or transactions told Reuters that Iranian sellers had offered Chinese buyers early last month a discount for delivery of Iranian light crude in December and January by five to six dollars a barrel above the trade price. Brent crude oil.
Contracts that ended in November were around ten dollars a barrel, traders said.
“This is a major oversight and it seems that the order to raise prices came from the headquarters in Tehran because they have also withheld goods from middlemen,” said a China-based trade executive.
An executive at a Chinese brokerage firm that buys directly from Iran said the OPEC member has “suspended some exports,” leading to a “deadlock” between Chinese buyers and Iranian suppliers.
This executive said, “It is not clear how things will end up… Let's wait and see how much the refineries are willing to accept the new price.”
China has saved billions of dollars by buying heavily discounted oil from embargoed producers such as Iran, Venezuela and, most recently, Russia, and these countries provide about 30% of China's crude imports.
The extent of the reduction in Iranian supplies to China is not yet clear. At least one buyer accepted the higher price, two traders said, explaining that the Shandong-based refiner delivered cargo late last month at a discount of between $5.50 and $6.50 at an agreed port in the buying country.
Both merchants' discounts may shrink further, as the most recent asking offer is $4.50.
Both traders say last year's average discount on Iranian light crude, a key type of medium-distilled high-yielding oil that China buys, was around $13.
A buyer from Shandong said, “Buyers are still finding it difficult to settle because the new prices are too high… but their options are limited and the Iranian side is very stubborn, so the room to negotiate prices is difficult. Interest from Chinese buyers.”
Since buying Iranian oil for the first time in late 2019, China's small private refineries, known as “teapots,” have become Tehran's main customers. They have replaced government refineries that stopped doing business with Iran for fear of violating US sanctions.
Chinese private refineries attract 90% of Iran's total oil exports, trade sources say, and they usually import oil from Malaysia or the United Arab Emirates.
Amid price clashes, Iran's total exports and China's imports from Tehran fell.
Vortexa Analytics, a firm that tracks oil tankers, said China imported about 1.18 million barrels a day of Iranian oil last month, down from 1.22 million barrels a day in November, down 23% from a record 1.53 in October. million barrels per day.
This represents the largest portion of Iran's global seaborne crude oil exports, which Kpler estimated at about 1.23 million barrels per day in December, up from 1.52 million barrels per day in November.
Kpler says Iran's floating stockpile and nearby waters have risen by about two million barrels to 15.5 million barrels in the past week.
The commercial director of an independent refinery said, “The Iranians want to capture the price of (Russian) Espoo crude oil. But they don't fully realize how different the sanctions on Iranian oil are from those on Russian oil.”
Washington has imposed sanctions on more than 180 individuals and companies linked to the oil and petrochemical sectors in Iran since 2021, and has identified 40 vessels as property prohibited from handling because they belong to sanctioned companies.
The main restrictions on Russian oil were the United States and its allies setting a maximum price of $60 a barrel in December 2022, aimed at punishing Moscow for its invasion of Ukraine.
India, a major buyer of Russian oil, often pays more than $60 a barrel, and the figure reached $85.42 in November, the highest level since the Group of Seven industrialized nations set the ceiling.

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