China Reduced Oil Imports from Iran; Cheaper Russian Oil Rivals Iran
According to Reuters, Iran’s oil exports to China faced a decline in April 2022. This comes as Russian oil exports to China have increased due to lower prices. Iran provides seven percent of China’s oil imports.
According to Reuters, Iran’s oil exports to China declined in April of the current year. Meanwhile, China’s imports of cheaper Russian oil have increased simultaneously. One of the reasons for China’s reduced oil imports from Iran is the decline in demand from Chinese independent refineries due to the outbreak of COVID-19 and subsequent quarantines and nationwide restrictions imposed in China.
Reuters reports that the decline in Iran’s oil exports to China has occurred at a time when Western diplomats have largely lost hope of reviving the 2015 nuclear agreement. Nevertheless, Iran still provides 7 percent of China’s oil imports, the world’s largest oil importer.
On the other hand, the global increase in oil prices has enabled Iran to use this opportunity to spend more time deciding whether to return to the JCPOA. Reviving the JCPOA would allow Iran to increase its oil exports. In recent two years, China has been Iran’s primary oil buyer, but if the JCPOA is revived, Iran could also export oil to its former customers, South Korea and Europe.
Increased Imports of Cheaper Oil from Russia
Meanwhile, Russian crude oil, due to sanctions by Western countries following Russia’s invasion of Ukraine and reduced demand from Europe, is being redirected to China.
Analysts at “Vortexa” data analysis company say that China imported 650,000 barrels of crude oil from Iran daily in April 2022. One month prior, in March, this figure was approximately 700,000 barrels per day.
Analysts at “Kpler” company estimated Iran’s oil exports in April at 575,000 barrels per day. According to this company’s data, this figure was 840,000 barrels daily in the first quarter of 2022; although analysts at this company expected Iran’s exports to increase in the coming weeks compared to April.
China’s independent refineries, which are generally located in the eastern province of Shandong, are the primary buyers of Iranian oil. These refineries have reduced their crude oil imports since February and halved their capacity in April. The reason for this was price increases, tighter import quotas, and quarantines resulting from the coronavirus outbreak, which led to reduced profit margins for the refineries.
In contrast, data from “Refinitiv” company show that China’s crude oil imports from Russia increased by 16 percent in April compared to March, reaching 680,000 barrels per day, the highest level since December of last year.
According to Reuters, at least one Chinese independent refinery purchased a shipment of Russian Urals crude oil for June delivery at a discount of six to seven dollars per barrel compared to Brent oil prices. This is while Iranian oil was traded at a five-dollar discount per barrel below Brent rates. For this reason, Chinese independent refineries tend to prefer purchasing Russian oil more.
