Chinese State Refiners Evaluate Potential Return to Iranian Crude Imports

Chinese state-owned refiners are weighing the possibility of resuming oil imports from Iran, though industry sources suggest that an abundance of alternative supplies and weakening domestic demand may limit their appetite. Any renewed procurement would mark the first such activity since 2019, when Sinopec and PetroChina ceased purchases following the reimposition of US sanctions during the first Trump administration.

According to three anonymous officials from Chinese state oil firms, PetroChina and Sinopec are currently evaluating the logistical hurdles associated with banking, insurance, and shipping requirements. This exploration follows a recent US waiver permitting global customers to purchase Iranian oil and petrochemical products—and settle those transactions in US dollars—following a memorandum of understanding that ended the US-Israeli conflict with Iran.

One source, citing a Chinese idiom regarding the risks of being the first to attempt something new, noted that there is currently no immediate shortage of oil, as exports from Iraq, Kuwait, and Saudi Arabia are increasing. The source further highlighted uncertainties regarding which banks would provide necessary financing and whether Iran possesses the sufficient shipping capacity to facilitate these deliveries.

While Sinopec and PetroChina have not yet commented, Asian refiners have remained well-supplied despite Middle East disruptions by diversifying sources to include Russia, Brazil, and West Africa. With the interim peace deal enabling the reopening of the Strait of Hormuz, shipments from Gulf suppliers are expected to recover.

ACCELERATED LOADINGS

Data from tanker tracker Vortexa indicates a significant surge in Iranian oil loadings, reaching approximately 1.6 million barrels per day (bpd) between June 19 and June 24, a sharp increase from 340,000 bpd in early June and 370,000 bpd in May.

However, another state oil official cautioned that tepid domestic demand may deter state firms, noting that declines in Chinese petrochemical and fuel consumption have outpaced recent reductions in refinery throughput and crude imports. Currently, China’s independent “teapot” refiners remain the primary buyers of Iranian crude, utilizing obscure middlemen and settling transactions predominantly in yuan.

Among the state-owned majors, Sinopec may be the most likely to return to the market. As Tehran’s former largest customer, Sinopec has experienced deeper supply cuts and may need to replenish commercial stockpiles that have been drawn upon since May.

An official close to the National Iranian Oil Co. (NIOC) revealed that Sinopec had inquired about purchases under a previous 30-day waiver in March, though the narrow timeframe ultimately prevented a deal. The NIOC, which maintains marketing teams in Shanghai and Beijing, expects renewed interest from state refiners shortly. The official added that the NIOC would serve as the sole contractual party for waiver-based oil, with Russia’s ESPO blend serving as the pricing benchmark for upcoming negotiations. The NIOC has not yet replied to requests for comment.

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