April data analysis shows China is reducing Iran oil import and focusing on the more affordable Russian suppliers.
As Reuters reported on May 9, preliminary estimates from Vortexa Analytics revealed that on a daily basis, China bought around 650,000 barrels of Iranian crude last month. A decrease from 700,000 barrels per day (or bpd) in March.
Data analytics firm Kpler estimated that the figure was only 575,000 bpd, a significant drop from the first quarter’s average of 840,000 bpd this year. But Reuters added that the agency would make some changes for the April levels in the coming weeks.
On the other hand, Refinitiv data illustrated that China’s seaborne crude imports from Russia increased by 16% in April compared to March, to around 860,000 bpd. It was the highest level since December, before the Ukraine war.
According to calculations from customs data by the South China Morning Post, Chinese spending on Russian oil in April climbed to a new high of 8.89 billion dollars. It was a 56.5% year-on-year increase and a 13.3% rise from March.
The Russia-Ukraine war plays a significant role in the shifting favor between Russian and Iran oil. As Reuters noted, it spurred the increase in Iran’s oil costs. Meanwhile, Russian oil is more available at lower prices as Europe rejects it due to the war.
Moreover, traders said Chinese independent refiners, also commonly known as teapots, have slowed their operations since February because of import quota and COVID restrictions.
Emma Li, a Chinese analyst with Vortex, said, “The Iranian barrels started having difficulties finding buyers since February, after independent plants cut throughput.”
Li said at least six cargoes of Iranian oil worth a total of eight million barrels had been stranded for more than three months off the coasts of Shandong and Zhejiang provinces.
A trading executive with a Shandong-based refiner told Reuters, “Teapots are facing terrible margins and plentiful oil on offer. Dealing Iranian and Russian barrels both carry risks, so refiners would be careful and pick the cheaper supplies that offer relatively better margins.”
According to traders, Russian Urals crude arriving in June could be sold at a discount of 6 dollars to 7 dollars per barrel to Brent on a delivered basis. Under Brent, each barrel is traded at 5 dollars.