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China's teapots are slowing the purchase of Iranian oil, resulting in steeper discounts on Iranian oil

As independent refiners reduce their purchases due to the rise in crude oil prices, sellers of Iranian oil are offering greater discounts to China this month. They want to reduce their inventories.

Three traders reported that Iranian Light crude oil was being traded between $3.30 and $35 a barrel under ICE Brent, compared with a discount around $2.50 in June.

The main Chinese buyers for Iranian crude are independent refineries known as teapots.

Since the conflict between Israel and Iran began last week, crude oil prices have risen by $10 per barrel.

According to traders, teapots in the province of Shandong, a major refining hub, have suffered their worst losses ever this year.

Consultancy Sublime Information estimates the average loss at 353 Yuan ($49.15 per metric ton) this week.

Sublime data revealed that Shandong refinery operation remained at 51% capacity on June 18 compared to 64% one year ago.

Storage Increasing

According to Vortexa, the stocks of Iranian crude oil in China, on tankers in Chinese ports and near them, as well as in floating storage near Malaysia, Singapore and Malaysia, total 70 million barrels.

China, the largest buyer of Iranian oil, has enough to last two months.

Kpler's tanker tracking data indicates that this year, more than 30,000,000 barrels of oil were stored in floating storage. Kpler, as well as Vortexa, estimate the total Iranian oil in floating storage at 120 million barrels. This is the highest since at least the year 2023.

Reports indicate that recent U.S. restrictions on three Chinese teapots have slowed down purchases from independent mid-sized retailers who were worried about being classified.

One trader estimated that the Iranian oil delivered to China in the first half 2025 would be replaced by 100,000 barrels of non-sanctioned crude. This is a fraction of the 1,4-1.5 million barrels of Iranian oil per day.

(source: Reuters)