China’s independent refiners swtich to Iraqi crude as US blocks Iran supplies

Investing.com -- China's independent refiners are purchasing Iraqi crude oil after a US blockade cut off supplies from Iran, their primary source, while state-owned competitors have secured most available Russian barrels.

Private processors, including smaller teapot refiners in Shandong province, purchased Iraq's Basrah Heavy and Basrah Medium grades for November delivery at premiums reaching $18 per barrel above ICE Brent, Bloomberg reported Tuesday. The transactions indicate an urgent need for immediate supplies rather than a strong rebound in Chinese oil demand.

At least 50 tankers, carrying mainly Iranian crude, remain stranded along China's coast as a US blockade aims to pressure Tehran into ending a seven-month war on terms favorable to Washington. State-owned Chinese refiners are securing most available Russian crude, pushing costs higher for independent processors.

Some Shandong teapot refineries could deplete their inventories by the end of this month, forcing them to compete for limited alternatives as Beijing issued new crude-import quotas, said Muyu Xu, senior crude analyst at Kpler.

"To avoid shutting down or significantly cutting run rates, refiners need to secure alternative supplies as soon as possible," Xu said.

The supply shortage has pushed some processors toward sulfur-rich Basrah crude, which they typically avoid in favor of cheaper Iranian barrels and diesel-rich ESPO from Russia's Far East.

Increased Middle Eastern flows are making Iraqi crude more accessible as Gulf producers transport more oil through the Strait of Hormuz. Producers in the region are offering larger discounts to protect market share after Saudi Aramco reduced prices for its flagship grade for Asian buyers.

Russian barrels remain expensive, with ESPO trading at a premium of almost $30 per barrel above Brent, the report said.

Buyers of Iraqi crude include both private processors in China's Shandong province and some large independent refiners. Iraqi barrels are marketed by trading houses including Vitol Group, Trafigura Group and Mercuria Energy Group, as well as TotalEnergies SE.

Iran supplied over 1 million barrels per day to China's independent refiners before the blockade, with private processors as the main buyers due to steep discounts on sanctioned barrels that improved refining margins.

Original Article

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