Chinese independent refiners, known as “teapots,” are reducing their imports of Iranian oil due to the looming threat of stricter sanctions under the Trump administration. The scarcity of Iranian crude, driven by U.S. sanctions and increased enforcement on dark fleet tankers, has led to rising prices and limited availability of Iranian oil.
In response, Chinese refiners are turning to alternative oil sources from the Middle East and Africa to meet their needs and diversify their supply chains. After years of benefiting from cheap Iranian crude, China’s larger independent refiners are now poised to shun Iranian oil due to their exposure to the U.S. banking system, according to Energy Aspects. This shift comes amid expectations that U.S. sanctions will tighten under the incoming Trump administration.
These refiners had resumed buying Iranian crude earlier this year after receiving guidance from the U.S. State Department that sanctions would not be enforced by the Biden administration. However, with Trump’s return to power, China’s refining sector may face significant pressure, with the government potentially curbing Iranian oil imports to align with U.S. policies and reduce refinery capacity. This could raise feedstock costs and squeeze margins for the teapots.
As Iranian oil becomes increasingly scarce, China’s independent refiners have turned to alternative sources from across the Middle East and Africa. Recent trades have included barrels from Abu Dhabi and Qatar, as well as West African grades, with traders noting the rising cost of Iranian oil due to sanctions.
Teapots, which typically take around 90% of Iran’s oil exports, are now adjusting their buying habits due to the declining availability of Iranian crude. The impact of broader U.S. sanctions, which were expanded in October to target more dark fleet tankers involved in the Iran-China trade, has tightened supply and driven up prices. Iranian oil exports to China have dropped over 10% compared to October, while the volume of West African crude has reached its highest level in two years, partly due to the increase in Iranian oil prices.
