The torrent of Iranian oil that’s been gushing into China in recent weeks is crowding out imports from other nations and threatening to complicate efforts by the OPEC+ alliance to tighten supply in the global market. China, the world’s largest crude oil importer, is currently buying close to 1 million barrels a day of sanctioned crude, condensate and fuel oil from the Persian Gulf nation, according to estimates by traders and analysts. That’s displacing favored grades from countries such as Norway, Angola, and Brazil, traders said, and resulting in an unusually quiet spot market.
Most refiners and traders around the world are reluctant to buy Iranian crude because of U.S. sanctions, which can result in repercussions like being cut off from the American banking system. However, the seemingly unstoppable rally in global crude prices is making the sharply discounted Iranian oil increasingly attractive to Chinese buyers including its independent refiners, which account for around a quarter of the country’s crude-processing capacity.
While global benchmark Brent is trading near $70 a barrel due to improving demand and tighter supplies from OPEC+, a continuation or increase in the Iranian flows could stymie the alliance’s efforts to keep driving up prices.