More Russian oil heading east is pushing Iranian oil sales to China

More Russian oil heading east is pushing Iranian oil sales to China


Iranian oil exports to China have fallen sharply since the start of the Ukrainian war, as Beijing has favored significantly cheaper Russian barrels, leaving nearly 40 million barrels of Iranian oil on tankers at sea in Asia, looking for buyers.

US and European sanctions imposed on the Moscow invasion of Ukraine on February 24 pushed more Russian oil east, where China caught it off guard, and reduced demand for oil from Iran and Venezuela, which are also subject to Western sanctions.

According to the carriers, about 20 oil vessels from Iran moored near Singapore in mid-May.

Some tankers have been anchored since February, but the number of storing Iranian oil has risen rapidly since April, trade and shipping sources said as more Russian oil headed east.

For data and analysis, Kpler said it estimated that Iranian oil in floating tanks near Singapore had risen to 37 million barrels in mid-May from 22 million barrels in early April.

The United States banned Russian oil imports shortly after Moscow’s invasion, while the European Union is considering a gradual embargo that will push further Russian oil costs to Asia.

“Russia can move almost half of its exports to Southeast Asia, especially China,” and this is a huge potential threat to Iranian oil exports, “said Hamid Hosseini, a member of the Iranian Oil, Gas and Petrochemicals Exporters’ Union Board. Reuters news agency.

Iran, whose oil industry has struggled for years with US sanctions imposed on Tehran’s nuclear program, has long relied on Chinese oil purchases to keep the economy afloat.

According to the consulting firm’s data and calculations, Iran’s exports to China were estimated at 700,000 to 900,000 barrels per day (bpd) in March.

However, according to Iman Nasseri, CEO of the Middle East consulting firm FGE, it was estimated in April that these exports fell by 200,000 to 250,000 barrels per day, indicating a decline of about a quarter or a third.

Kpler said Iran exported an average of 930,000 bpd in the first quarter, mainly to China, while its preliminary estimate for April was 755,000 bpd, although it said the estimate could be revised due to the difficulty of tracking Iranian sales.

Trade under sanctions

“China is clearly buying more now [Russian] Ural costs. The Urals’ exports to China more than tripled. This is despite the weakening of Chinese imports, “said Homayoun Falakshahi, senior analyst at Kpler.

China, where total oil imports have recently declined due to COVID-19 restrictions, is also the largest buyer of Russian oil, ESPO Blend.

Iran and Russia have been in close contact in recent weeks to discuss how to trade oil under sanctions, three sources told Reuters. One source said that the Russian side wanted to learn how Iran managed transport, trade and banking, while the two sides also discussed the creation of joint ventures, banks and funds.

Another source said that further talks are planned when Russian Deputy Prime Minister Alexander Novak visits Iran next week.

However, the talks have not eased competition in the search for buyers for Russian urals and Iranian oil, which are usually heavier and have a higher sulfur content, making processing more expensive than Russian oil.

“No one is looking at Iranian oil anymore, because Russian species are much better and at lower prices.” Iranian oil sellers are under strong pressure, “said a trader with a Chinese refinery.

He said the Urals shipped to China sold at a $ 9 discount per barrel for Brent’s June delivery, so Iranian barrels had to be offered at $ 12 to $ 15 discounts to compete.

“You can legally buy Russian oil at a discount, but Iranian oil is still subject to sanctions, so people naturally choose a simpler option,” the European trader said, citing stricter US sanctions on Iranian exports.

Russian oil and refined products are also flowing to other markets, notably India and the United Arab Emirates (UAE).

Deliveries of Russian fuel oil to the Fujairah storage hub in the United Arab Emirates are expected to climb to about 2.5 million barrels in May, which is about 125 percent more than in April.

India, meanwhile, has increased Russian oil purchases. According to Kpler, by the beginning of June, India will import more than 30 million barrels in the last three months, which is more than double the volume imported in the whole of 2021.

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