Discounts deepen on Iranian oil in China as struggling teapots slow buying

Reuters

3 hours ago

SINGAPORE, June 20 (Reuters) - Sellers of Iranian oil to China are offering deeper discounts this month as they look to reduce inventories and as independent refiners slow their buying due to a jump in crude prices, traders and analysts said.
Iranian Light crude oil is being traded at $3.30-$3.50 a barrel below ICE Brent for July deliveries, compared to a discount of around $2.50 for June, three traders said.
Independent refineries, known as teapots, are the main Chinese buyers of Iranian crude.
They are currently being squeezed by a $10 a barrel surge in crude prices since the Israel-Iran conflict began last week.
Teapots in refining hub Shandong province are incurring their deepest losses this year, traders said.
Consultancy Sublime China Information estimates average losses at 353 yuan ($49.15) per metric ton this week.
Shandong refinery operations remained low at 51% of capacity as of June 18, down from 64% a year earlier, Sublime data showed.
STORAGE RISING
Meanwhile, stocks of Iranian oil, including in Chinese storage, in tankers near and off Chinese ports awaiting discharge, and in floating storage near Malaysia and Singapore, amount to roughly 70 million barrels, according to analytics firm Vortexa.
That is enough for two months' demand for Iranian oil from China, the biggest buyer.
Data from tanker tracker Kpler points to a stockbuild of more than 30 million barrels this year in floating storage. Both Kpler and Vortexa estimate total Iranian oil on the water, including floating storage, at nearly 120 million barrels, the most since at least 2023.
Recent U.S. sanctions on three Chinese teapots curtailed buying from several mid-sized independents worried about being designated, Reuters has reported.
One trader estimated the volume of Iranian supply to China replaced by non-sanctioned barrels at 100,000 barrels per day in the first half of 2025 - a fraction of the 1.4-1.5 million bpd of Iranian oil being delivered to China.
($1 = 7.1819 Chinese yuan renminbi)