Iranian crude offers to China decline amid tightening U.S. sanctions, sources report

By Siyi Liu and Chen Aizhu

SINGAPORE, Aug 21 (Reuters) – This week, offers for Iranian crude to Chinese purchasers have slipped and prices have risen as the U.S. blockade curtails Tehran’s exports, trade sources said, with additional sanctions from Washington looming.

The United States re‑imposed its blockade on Iran’s shipping and ports on July 13 after negotiations to end the conflict collapsed, an effort aimed at choking off oil sales — Tehran’s chief source of hard currency — thereby adding to earlier losses caused by wartime attacks on its energy facilities.

Four trade sources said the volume of offers for Iranian oil destined for China in September and October has fallen compared with July and August, noting that the drop reflects the fact that many barrels already loaded onto vessels have been sold.

Since mid‑July, Iranian oil exports have slipped, with Kpler data showing no detectable crossings of the Strait of Hormuz by supertankers laden with Iranian crude, although many ships switch off their AIS transponders to evade detection.

The tightening supply poses a risk to a vital feedstock for China’s independent “teapot” refiners in Shandong province, which handle roughly one‑fifth of the nation’s refining capacity and are the leading purchasers of sanctioned oil.

Three sources noted that, while Iranian crude usually trades at a discount, certain cargoes are now fetching premiums over ICE Brent futures — one source quoted a roughly $2‑per‑barrel premium. This marks a sharp reversal from earlier in the week, when Iranian Light was offered at about a $3‑per‑barrel discount, unchanged from a month ago.

Kpler data indicate that Iranian crude held in floating storage beyond the U.S. blockade zone has dropped to roughly 80 million barrels, down from about 105 million barrels before the blockade was re‑imposed.

Two sources estimated that only around 30 million barrels of Iranian crude remain in Asian waters — roughly half of typical levels.

Kpler senior crude oil analyst Muyu Xu said approximately 40 million barrels of Iranian oil are stationed on vessels in Malaysian waters east of Singapore, although the majority of that volume has already been committed to buyers.

“This implies that buyers may see virtually no fresh Iranian supplies for late‑September delivery and beyond, as no laden Iranian tankers have yet succeeded in breaking through the U.S. blockade,” she noted in a Friday LinkedIn post.

UNCERTAIN SUPPLY

Amid the uncertain supply outlook, one independent teapot refiner purchased Brazil’s Lapa crude this week, while others are evaluating Iraq’s Basrah grade, according to two sources.

“Given the limited availability of Iranian oil due to the U.S. blockade, Chinese teapot refiners are now turning to sources outside Russia and Iran,” said Sun Jianan, senior oil analyst at Energy Aspects.

China’s imports of Iranian oil have slipped year‑on‑year after the outbreak of the U.S.–Israel conflict in February, which curtailed Middle Eastern exports. June shipments fell to 785,000 barrels per day — the lowest level since February 2023 — according to provisional Kpler data.

July imports are estimated to have risen to about 823,000 barrels per day, yet August intake to date has slipped to roughly 534,000 barrels per day, the data indicate.

Last year, China’s average Iranian oil purchases stood at 1.4 million barrels per day, Kpler reported.

WARY OF SANCTIONS

On Thursday, U.S. Treasury Secretary Scott Bessent warned Iran of “the toughest sanctions in history,” saying further details would emerge on Monday, aimed at pressuring Tehran to reopen the Strait of Hormuz and halt the conflict.

The development has put China’s independent refiners on alert for possible additional sanctions aimed at particular buyers, a source at one plant said.

However, the source added that new sanctions are unlikely to curb purchases substantially, pointing out that refiners previously sanctioned have continued to process Iranian oil.

China, the world’s largest crude importer, purchases more than 80 percent of Iran’s exported oil, according to 2025 Kpler data. Beijing maintains that it opposes unilateral sanctions, and a Chinese Foreign Ministry spokesperson said on Thursday that sanctions will not resolve the conflict.

Iranian oil exports fell to just 100,000 barrels per day by July 2019 after the United States tightened sanctions and China briefly halted purchases.

In September 2019, a devastating drone strike struck Saudi Arabia’s Abqaiq oil processing plant, an incident analysts said illustrated how Iran and its proxies can escalate hostilities when Western financial pressure on Tehran rises.

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