Offers of Iranian crude to Chinese buyers have declined and prices have jumped this week as the U.S. blockade has cut Tehran's shipments, according to trade sources, with the threat of more sanctions from Washington looming.
The number of offers for Iranian oil cargoes to China for September and October delivery has declined from July and August cargoes, four trade sources familiar with the matter said. The offers have declined as barrels already in ships on the water have been sold, they said.
Iran's oil exports have fallen since mid-July, with no visible crossings of the Strait of Hormuz by supertankers carrying Iranian crude since then, according to data from ship-tracking company Kpler, although many vessels turn off their location transponders, making them difficult to track.
The squeeze threatens a key feedstock for independent refiners, known colloquially as teapots, located in China's eastern province of Shandong, which account for about a fifth of China's refining capacity and are the top buyers of sanctioned oil.
Three of the trade sources said some Iranian crude, typically sold at discounts, was being offered at premiums to ICE Brent futures, with one source citing a premium of about $2 a barrel. That was an abrupt shift as cargoes of Iranian Light were being offered earlier this week at a discount of around $3 a barrel, the same as a month earlier.
Iranian crude held in floating storage outside the U.S. blockade zone has fallen to about 80 million barrels from about 105 million barrels before the blockade was reinstated, Kpler data showed.
Two of the sources estimated that only about 30 million barrels of Iranian crude remained in Asian waters, half of the usual levels.
Kpler Senior Crude Oil Analyst Muyu Xu estimated there are 40 million barrels of Iranian oil on ships in Malaysian waters east of Singapore, though most of that has been promised to buyers.
"This suggests buyers could face virtually no new Iranian supplies available for late-September delivery onwards since no laden Iranian tankers have so far managed to break through the US blockade," she wrote in a Friday LinkedIn post.
UNCERTAIN SUPPLY
With the uncertainty over Iranian supplies, one teapot bought Brazil's Lapa crude this week, while others were looking at Iraq's Basrah crude, two of the sources said.
"Given the thin Iranian availability amid the U.S. blockade, Chinese teapots are now looking beyond Russia and Iran," said Sun Jianan, senior oil analyst at Energy Aspects.
China's Iranian oil imports have dropped from a year ago following the start of the U.S.-Israeli war on Iran in February that has cut Middle Eastern oil exports. Shipments fell to 785,000 barrels per day in June, the lowest since February 2023, provisional Kpler data showed.
Imports in July likely rose to 823,000 bpd but the intake so far in August has dropped to 534,000 bpd, the data showed.
Last year, China's Iran purchases averaged 1.4 million bpd, according to Kpler.
WARY OF SANCTIONS
On Thursday, U.S. Treasury Secretary Scott Bessent threatened Iran with "the toughest sanctions in history," with details to come on Monday, to pressure Iran to reopen the Strait of Hormuz and end the war.
That has China's independent refiners on alert for further sanctions targeting specific buyers, a source at one of the plants said.
However, the source said new sanctions were unlikely to significantly deter purchases, noting that refiners which have been previously sanctioned continued processing Iranian oil.
China, the world's biggest crude importer, buys more than 80% of Iran's shipped oil, according to 2025 data from Kpler. Beijing has said it rejects unilateral sanctions, and a Chinese foreign ministry spokesperson said on Thursday sanctions will not solve the conflict.
Iranian oil exports plunged to only 100,000 bpd by July 2019 after the U.S. further enforced sanctions and China temporarily suspended purchases.
Later in September 2019, a devastating drone attack hit Saudi Arabia's massive Abqaiq oil processing facility, a move analysts said showed the ability of Iran and its proxies to escalate the fight when Western financial pressure on Tehran increases.
