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.
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Source: Breakwave Advisors
