China’s crude imports from Iran are likely to have peaked in August at 874,000 b/d ahead of the looming re-imposition of U.S. sanctions in November, according to S&P Global Platts’ trade tracker cFlow.
The last record high was in April 2014, at 803,000 b/d, data from China’s General Administration Customs showed.
The imports in August included barrels directly shipped to China and a VLCC cargo that offloaded in Myanmar and was reportedly sent via the China-Myanmar pipeline to a refinery in southwest China.
The arrivals last month took inflows from Iran over January-August to 165.57 million barrels, 72% of total Iranian crude imports of 229.99 million barrels over full year 2017, cFlow data showed.
“It is unlikely the inflows will rise further in the rest of the year and the record [volume imported] in August was probably because of Chinese buyers’ intention to take as many Iranian barrels as possible ahead of the re-imposition of U.S. sanctions in November,” a Hong Kong-based analyst said.
Chinese buyers have likely loaded 17.42 million barrels or 581,000 b/d of crude from Iran in August for September delivery, including one VLCC cargo to Myanmar, cFlow showed. The volume was 14.1% lower than the average 676,000 b/d recorded over the first eight months of the year.
Most Iranian crude imported to China is consumed by Chinese refineries, with the balance saved in bonded storage rented by the state-owned National Iranian Oil Company.
China is expected to remain the biggest buyer of Iranian crude despite the sanctions, as Beijing has often said that business between the two countries will run as normal despite U.S. sanctions.
“The company’s business will be hurt if it has to suspend imports from Iran,” an executive with Sinopec said last week, adding the company was in talks with relevant parties to mitigate the risks.
Sinopec is the biggest refiner in the world by capacity and throughput, absorbing around two-thirds of China’s crude arrivals from Iran. It bought around 149.83 million barrels of Iranian crude oil in 2017, accounting for 8.6% of its total crude throughput, according to filings with the U.S. Securities and Exchange Commission.
The executive said Sinopec’s dependence on Iranian crude was natural because many refineries were configured to process Iranian crude oil, which has a rich aromatics content, and it has secured these supplies legally for a long time.
“Since we have performance obligations under our Iran-related contracts in 2018, we are contractually required to continue our [purchases],” Sinopec said in the filings.
State-owned trading house Zhuhai Zhenrong is the other key term contract buyer of Iranian crude to supply refineries in China.
PetroChina also takes about 21.99 million barrels/year of Iranian crude, according to a company executive. The volume accounts about 10% of the crude flow to China, cFlow showed.
PetroChina, the second biggest refiner in China, recently increased its capacity for cracking Iranian crude with its newly built Yunnan Petrochemical complex in southwest China.
The refinery has taken two cargoes of Iranian crudes in 2018, which were delivered in June and August via the China-Myanmar pipeline. It is expected to receive the third cargo, of around 1.99 million barrels, in Myanmar in early September, cFlow showed.
“PetroChina continues to take Iranian crudes as usual and we don’t have any plans to stop importing them yet,” a company executive said last week. “But our Iranian crude volume is small, which is not a big deal [if it was forced to suspend buying],” he added.