Chinese independent refiners turn to Iraqi and Qatari crude as Iranian supply drops
Chinese independent refiners have increased purchases of Iraqi and Qatari crude for October and November delivery to replace falling Iranian supplies, traders say. At least 12 million barrels have been bought from trading houses, with some cargoes sold at premiums of US$12 to US$20 a barrel above th
Chinese independent refiners have stepped up purchases of crude from Iraq and Qatar for October and November delivery to replace dwindling Iranian supplies, as exports from other Gulf producers through the Strait of Hormuz recover, traders said.
Chinese refiners bought at least 12 million barrels of Iraqi and Qatari crude from trading houses Mercuria, Totsa and Trafigura, according to three traders close to the deals. One estimated total purchases at 15 million to 20 million barrels. The cargoes were sold at premiums of US$12 to around US$20 a barrel to the ICE Brent benchmark on a delivered basis, the traders said.
Most of the purchases were Iraqi Basra Medium and Heavy crude, among the cheapest Middle East grades available. Buyers included Hongrun Petrochemical, Qicheng Petrochemical, Qirun Petrochemical, Hualong and Chambroad Petrochemical, the sources said. One trader said Iraqi oil has become the new benchmark for China's independent refiners due to its ample supplies and promptness. Hongrun and Shenchi Petrochemical also bought 3 million barrels of Qatar's al-Shaheen crude for arrival in early November, the sources said, speaking on condition of anonymity because they are not authorised to speak to media.
The refiners did not immediately respond to requests for comment amid a holiday in China. Mercuria and Trafigura declined to comment. TotalEnergies did not immediately respond to a request for comments. The deals followed purchases of more than 20 million barrels of crude from West Africa, Canada and Colombia between late August and early September as Iranian supply dwindled after the US imposed a naval blockade on Iranian vessels in July.
China's independent refiners have relied heavily on discounted crude from sanctioned producers, particularly Iran, in recent years. But China's imports of Iranian oil nearly halved in September from a year earlier to 590,000 barrels per day, the lowest level since January 2023, according to data from analytics firm Kpler. The volume of Iranian crude stored on vessels outside the blockade zone has more than halved to 45 million barrels from 100 million barrels in late July, Kpler said. Its data showed that Iran did not export any crude in September for the first time since Kpler began tracking flows from the producer in 2013.
As exports through the Strait of Hormuz recover, trading houses have lowered offer prices to stimulate demand from Chinese independent refiners, one trader said, adding that buyers were unwilling to pay spot premiums above US$20 a barrel. Refinery utilisation rates in Shandong fell to about 55 per cent by the end of September from nearly 60 per cent at the start of the month, according to consultancy Horizon Insights, as margins deteriorated after China capped fuel price increases while crude feedstock costs surged. Refiners were losing 250 yuan to 500 yuan per metric ton by late September, compared with profits of about 500 yuan per ton in early September, according to Horizon.