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Traders and analysts report that Iranian oil sellers to China are offering deep discounts this month as they aim to reduce inventories amid slowing demand from refiners due to surging oil prices.
According to Reuters, Iranian light crude oil is trading at a discount of $3.3 to $3.5 per barrel compared to the international benchmark Brent crude for July delivery. This discount has widened from around $2 per barrel in June.
Independent refineries, known as “teapots,” are the main buyers of Iranian crude oil from China. They are currently under pressure as crude oil prices have surged by over $10 per barrel since the Israel-Iran conflict began last week.
Traders say refineries in Shandong province are facing the biggest losses this year.
Consulting firm Sublime China Information estimates an average loss of 353 Chinese yuan ($49.15) per ton this week.
Data from Sublime shows that refining activity in Shandong remains low at 51% of capacity as of June 18, down from 64% in the same period last year.
Meanwhile, Iran’s oil inventories (including those in storage tanks, on tankers near/off the coast of Chinese ports awaiting discharge, and in floating storage near Malaysia and Singapore) have reached approximately 70 million barrels, according to analytics firm Vortexa.
This volume meets China’s crude oil demand from its top supplier, Iran, for two months.
Data from tanker-tracking firm Kpler indicates that inventories have grown by over 30 million barrels this year in floating storage. Both Kpler and Vortexa estimate Iran’s total oil volumes in floating storage and other tanks at nearly 120 million barrels, the highest since at least 2023.
In terms of overall oil exports, Iran has exported an average of 2.33 million barrels per day (bpd) since June 13, when Israel started its conflict with Iran.
The average volume of goods exported from Iran has increased by 44% over the 12 months up to June 12.
“They are trying to export as many barrels as possible but have to put safety first,” said Samir Madani, co-founder of TankerTrackers.
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