Independent Chinese refineries increased its crude oil imports from Iran last month as the government issued a new batch of import quotas.
Total crude imports were up by almost 40 percent from October to an average of 600,000 bpd, Bloomberg reported, citing data from Kpler. The new quotas were issued in mid-October.
What follows now, however, will be a slowdown in imports from all sources as China tightens restrictions in response to the Omicron variant and as Beijing continues to crack down on independent refiners. An effort to curb pollution ahead of the Winter Olympics will also affect imports negatively, as will the Lunar New Year holiday when demand declines.
Chinese imports in March 2022 are set to be around 10.7 million barrels per day (bpd). This would be about 1 million bpd lower than the crude oil imports in March this year, according to estimates from consultants FGE cited by Bloomberg.
This year, Chinese crude oil imports are already on track to post the first annual decline compared to 2020. This would be the first such drop in average annual crude imports since records began back in 2004, according to data from the Chinese General Administration of Customs.
Even so, imports of Iranian crude have been strong among private refiners, or teapots, due to the price discount, especially as Saudi Arabia, China's top supplier of crude, raised its official selling prices for Asian clients. According to traders cited by Bloomberg, Iranian crude sells at a discount of up to $4 per barrel to ICE Brent futures prices.
Although Chinese state refiners shun Iranian oil, at least publicly, because of U.S. sanctions, private refiners are not subject to that much international scrutiny and have never really stopped buying Iranian crude. Also, private refiners do not have long-term contractual commitments with other suppliers, unlike state refiners.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com:
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More