China’s Workarounds Stabilize Sanctioned Oil Flows

China’s imports of sanctioned oil are rebounding as refiners and traders adapt to recent restrictions. The introduction of new U.S. sanctions on Russian and Iranian oil tankers initially caused a decline in shipments, but supply chain adjustments have helped stabilize flows.

New Ports and Alternative Routes

• Diversification of Ports: Independent oil terminals in Dalian, Shanghai, Zhoushan, and Huizhou have started accepting sanctioned oil, easing the burden on Shandong’s state-run ports.
• Dongying Port’s Adaptation: By transferring its ownership to private entities, Dongying Port has maintained cargo discharges, helping sustain crude inventories.

Iranian Oil Shipments

• Ship-to-Ship (STS) Transfers: To overcome berthing limitations, eight VLCCs have facilitated Malaysia-to-China STS transfers since late January.
• Rebound in Imports: Iranian crude discharges rose to 1.3 million barrels per day (mbd) in February, slightly exceeding 2024 levels.

Russian Oil Adjustments

• Focus on Far East ESPO Crude: Russia has shifted non-sanctioned Aframax and Suezmax tankers to its Kozmino Port, restoring February ESPO loadings to 920kbd, up from 860kbd in January.
• Freight Rate Stabilization: Increased vessel availability has reduced shipping costs, easing the Kozmino-to-Shandong rate to $6.50 per barrel, down from $9 per barrel in January.

Future Outlook

• Potential Return to Russian Urals Crude: China may increase purchases due to changes in tariffs and pricing trends.
• Limited Growth in Iranian Imports: While Iran’s exports have stabilized, a significant increase is unlikely due to pricing constraints.

China’s refiners continue to adjust strategies to ensure a steady supply of crude oil while navigating evolving market conditions.