Chinese independent refiners are buying Iranian crude at a premium to Brent crude, for the first time in years, Reuters has reported, noting prices were driven higher by anticipated increases in Indian purchases of Iranian oil.
At least two so-called teapot refiners had bought cargoes of Iranian Light at premiums of between $1.50 and $2 per barrel to Brent crude this month, two unnamed trading sources told the publication, after the United States temporarily lifted sanctions on the commodity to manage international prices.
India, which stopped importing Iranian crude in 2019 to comply with the U.S. sanctions, is now scrambling for crude supply as its imports from the other Middle Eastern producers account for about half of all its crude purchases. Supply from the Middle East has been severely constrained over the past weeks due to the closure of the Strait of Hormuz.
As a result, reports emerged earlier this week that India was expecting its first cargo of Iranian crude in seven years, set to arrive by the end of the week. India has also returned to buying Russian crude en masse, thanks to a separate U.S. waiver. India’s imports of Russian crude oil jumped by 90% in March versus February.
Chinese refiners, meanwhile, just got new crude import quotas from Beijing and rushed to utilize them as global benchmarks dipped below $100 per barrel amid attempts to secure a ceasefire between the U.S. and Israel, and Iran.
The Chinese government last week issued an import quota for crude oil for a total of 55 million tons to independent refiners. Beijing has ordered the refining industry to keep producing fuels at the average run rates for the past two years to make sure there is enough fuel supply for the domestic market, despite refiners’ higher costs that are eroding their margins.
By Irina Slav for Oilprice.com
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