Chinese refiners increase oil imports from Iraq

An oil refining facility in the port city of Dalian in the Chinese province of Liaoning. Photo: Xinhua Baghdad (IraqiNews.com) – Chinese independent refiners are swiftly increasing their imports of Iraqi and Qatari crude to compensate for a sharp decline in Iranian oil supplies. As their stockpiles near depletion, private refineries in China are paying considerable premiums to acquire alternatives, according to Reuters. Experts see that the step represents a desperate search for alternatives due to logistical obstacles, rather than a true rebound in Chinese domestic crude demand. Private refineries in China have historically relied on deeply discounted, sanctioned Iranian oil to optimize their refining margins, previously importing over one million barrels per day. However, the US naval blockade and the higher cost of Russian oil alternatives are two major geopolitical factors that have forced a shift. A rigorous US blockade linked to the larger crisis involving Iran has trapped at least 50 tankers transporting mostly Iranian petroleum off the Chinese coast, cutting off the refiners’ key supply source. State-owned Chinese refiners have successfully secured the majority of the available Russian crude oil. As a result of the fierce competition, Russian barrels now command significant premiums of roughly $30 per barrel above Brent, driving smaller independent refiners out. Refiners have purchased at least 12 million barrels of Iraqi and Qatari oil for October and November delivery, with total estimates ranging from 15 million to 20 million barrels. Buyers are mostly interested in the sulfur-rich Basrah Medium and Basrah Heavy grades. Independent refiners normally reject these higher grades in favor of lighter Iranian or Russian choices, but they are embracing them since they are readily available. Major global commodities trading firms such as Vitol Group, Trafigura Group, Mercuria Energy Group, and TotalEnergies SE are facilitating the deals. This move is being aided by a steady recovery in total exports leaving the Arabian Gulf via the Strait of Hormuz, making Middle Eastern options physically available even as regional tensions remain.