China’s seaborne crude oil imports experienced a notable downturn in May 2025, falling 8% month-on-month and 3% year-on-year, dipping below the psychologically important 10 million barrels per day (mbd) mark. This decline was broad-based, with volumes from nearly all major suppliers, including Saudi Arabia, Iraq, Russia, and Iran, showing decreases from April levels.
Discounted Crude Imports
Imports of discounted crude oil from Iran, Russia, and Venezuela by China’s “teapot” refineries (independent refiners) saw a decline from their record highs during April and May. This reduction primarily reflects weaker demand from these teapot refineries.
Several factors contributed to this slowdown:
- Widespread Maintenance: Extensive maintenance activity is expected to continue impacting refiners, stretching into July, which naturally curtails their crude intake.
- Ample Onshore Inventories: Significant onshore inventories in Shandong province allowed teapots to reduce their spot crude purchases, particularly for Iranian barrels.
Consequently, China’s Iranian crude imports dropped to below 1.1 million barrels per day (mbd) in May. This represents a nearly 30% month-on-month decrease and falls below the approximate 1.4 mbd average observed in 2024.
Despite this recent decline, teapot refineries are anticipated to continue their reliance on discounted crude barrels to preserve their margins. With Indian refiners actively competing for Russian crude (from both western-facing ports and the Far East), Iranian supply remains a crucial feedstock for China’s independent refineries. This suggests that while imports dipped, the underlying demand for discounted oil is still present, given the competitive landscape for alternative cheap sources.
Operational Slowdown
The decline in China’s Iranian crude imports in May is partly attributed to a temporary operational slowdown at Dongying Port in northern Shandong. This disruption occurred after one of its crude terminals was sanctioned by the US Office of Foreign Assets Control (OFAC) in early May 2025.
Discharge operations at the port were affected for approximately a week but have since gradually recovered. Despite the sanction, Dongying Port managed to handle over 400,000 barrels per day (kbd) of crude imports through May, although this is a decrease compared to the around 520 kbd handled in the preceding two months.
While OFAC’s latest designation might prompt other ports in Shandong to tighten their compliance protocols – potentially leading to an increase in ship-to-ship (STS) transfers to non-sanctioned tankers – Dongying is still expected to remain a crucial entry point for Iranian and Russian crude. The reasoning is that, now being under sanctions itself, Dongying is likely to continue being accommodating to other sanctioned tankers.
As of June 9, at least 12 Aframax tankers, carrying either Iranian or Russian crude, were observed anchoring offshore North Shandong, presumably awaiting discharge at Dongying. This indicates the continued flow of sanctioned crude into China via this port, despite the recent US measures.
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Source: Breakwave Advisors
