China’s seaborne crude imports reached 10.4 million barrels per day (mbd) in October, marking a significant increase driven by refiners seeking to capitalize on improved margins and maximize fuel export quotas. However, recent sanctions have created immediate logistical disruptions for mainstream crude flows, while the resilience of the sanctioned trade continues to fill the market.
Crude Import Trends and Market Share
- Overall Growth: Crude imports in October rose 6% month-on-month and 9% year-on-year, as refiners ramped up throughput.
- State-Run Refiner Strategy: State-run refiners increased their runs in the latter half of the year, aiming to capture domestic market share from private refiners and fully utilize their fuel export quotas. This activity has led to a visible drawdown of onshore commercial crude stockpiles among state-run entities.
- Sanctioned Crude Resilience: Imports of sanctioned barrels from Iran, Venezuela, and Russia increased in October, accounting for roughly 30% of China’s seaborne crude arrivals. This resilience is attributed to strong private-sector demand and the adaptability of the “dark fleet” logistics.
- Quota Constraint: The buying momentum among private refiners is expected to slow toward the end of the year as they approach their crude import quota limits. New quotas (for December consumption and the full 2026 year) are typically issued in late November and late December, respectively.
Sanctions and Logistics Disruption
Recent sanctions, particularly those by the U.S. OFAC, have had a more immediate and tangible impact on mainstream crude logistics than on the targeted flows of sanctioned oil.
| Sanctioned Entity | Impact on Mainstream Flow | Mitigating Actions by Refiners |
| Rizhao Shihua Terminal (Sinopec Hub) | The U.S. sanctioned this key state-run import hub for handling Iranian crude. It typically moves 800 kbd of mainstream crude (20% of Sinopec’s total imports). | Rizhao-fed refineries drew down inventories. Sinopec diverted VLCCs to alternative ports (Tianjin and Zhoushan) and increased throughput at nearby refineries to compensate. |
| Yulong Petrochemical (Private Refinery) | The UK and EU sanctioned this 400 kbd private refinery. Mainstream supplies effectively halted, disrupting 350-450 kbd of non-sanctioned Middle East, Atlantic Basin, and Canadian (TMX) crude. | Yulong was forced to increase Russian crude intake, seek alternative heavy feedstocks (like domestic crude), or curtail run rates. |
The combined impact of these two sanctions has disrupted approximately 1 mbd of mainstream crude inflows into Shandong, leading to slower tanker discharges, increased offshore congestion, and tighter VLCC availability for mainstream grades.
Pressure on Sanctioned Crude Prices
Despite high seaborne imports, the volume of sanctioned crude available is increasingly constrained by high onshore inventories in Shandong and the nearing import quota limits of independent refiners.
- Growing Floating Storage: Iranian crude exports remained elevated while Chinese intake lagged, resulting in a growing build-up of unsold cargoes at sea.
- Price Collapse: This dynamic, combined with a sharp drop in Russian crude prices due to buyer hesitation in India and China, pushed the delivered-to-Shandong prices for Iranian and Russian barrels to two-year lows by late October.
- Outlook: A price recovery for these deeply discounted grades is contingent upon private refiners receiving new import quotas and other Asian buyers resuming stable purchases of Russian crude.
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Source: Breakwave Advisors
