China is gorging on sanctioned Iranian oil — with imports forecast to more than double this month from February — as other countries hold off purchases for fear of incurring the wrath of the U.S., Eanian shipments to the province of Shandong, home to a quarter of China’s refining capacity, have surged so much this month they’re causing congestion at ports and filling up storage tanks, traders and analysts said.
Oil from the Persian Gulf nation is heavily discounted due to the American sanctions that were first imposed in mid-2018. In China, it usually goes for $3 to $5 barrel less than benchmark Brent crude, according to traders, who say that’s prompting some local companies to stock up as global prices rise and economic activity picks up following the Lunar New Year holidays.
Chinese imports of Iranian crude will rise to 856,000 barrels a day in March, the most in almost two years and up 129% from last month, according to Kevin Wright, a Singapore-based analyst with Kpler. His estimates include oil that’s undergone ship-to-ship transfers in the Middle East or in waters off Singapore, Malaysia and Indonesia to obscure their origin.
Most refiners and traders are reluctant to purchase Iranian crude for fear of repercussions that can include being cut off from the American banking system and having cargoes seized. Tehran has used aggressive marketing as it tries to raise export income and boost an economy reeling from the sanctions.
Relations between Washington and Tehran took a nosedive when former president Donald Trump pulled out of a nuclear accord with Iran. The country’s official oil exports have plunged to almost nothing from around 2.5 million barrels a day before the American sanctions. Iran still produces roughly 2 million barrels daily, however.
Tensions have remained high since Joe Biden came to power, although Iranian President Hassan Rouhani said this week his country was ready to revert to full or partial compliance with the nuclear deal if the U.S. did the same. Tehran has said Washington should lift the sanctions before the two sides start talks.