(Bloomberg) -- China’s small, private refiners are paying up for Iranian oil due to reduced flows and few offers.
The so-called teapots bought Iranian Light crude for December arrival at a discount of $2 to $3 a barrel against the ICE Brent benchmark, the smallest gap this year, according to market participants. Traders said they’ve seen fewer cargo offers over the past weeks, while there have also been talks of cargo delays that have crimped Iran-to-China volumes in recent months.
Teapots account for about a quarter of China’s crude processing and are the main buyers of Iranian crude, which has been discounted because of US-led sanctions. Larger government-linked processors tend to avoid the fuel because of fears of economic repercussions.
Power-generation issues in Iran and the US adding more Tehran-linked tankers to a blacklist last month may have contributed to the supply shortage. While Chinese refinery import quotas for this year are also running low, the teapots will be allowed to use some of their allocations for 2025 as part of efforts by local governments to hit performance indicators, the traders said, adding that about a dozen have applied to bring in crude using the system.
Chinese refiners remain “laser-focused” on securing Iranian supplies despite tightening sanctions and president-elect Donald Trump’s promise to increase pressure on Iran, Kpler said in a note to clients on Thursday. The data intelligence firm sees Iranian crude oil exports declining by 54,000 barrels a day to 1.43 million barrels a day in November because of domestic demand for electricity generation during a severe natural gas shortage.
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