China’s teapots buy Iranian oil at premiums to Brent for first time in years

SINGAPORE: Chinese independent refiners have bought Iranian oil at premiums to Brent for the first time in years, after benchmark prices fell and amid expectations that India might purchase more cargoes after Washington’s temporary waiver of sanctions.

India is set to get its first Iranian oil cargo in seven years after Washington temporarily waived sanctions on Iranian oil at sea due to the impact of the conflict in the Middle East.

Iranian oil typically trades at discounts to Brent because of the sanctions. Chinese independent refiners, also known as teapots, are its biggest buyers. At least two refiners in Dongying, a major hub for independents in the eastern Shandong province, purchased Iranian Light at premiums of $1.50 to $2 a barrel to ICE Brent earlier this week, trade sources said. That compared with a USD10 per barrel discount before the conflict.

The cargoes are floating near China and will be delivered this month, the people said. One of the people said he believed it was the first time since 2022 that teapots have bought Iranian oil at a premium to Brent.

These refiners, armed with fresh import quotas from Beijing, sought prompt cargoes of Iranian crude after Brent crude futures dropped 13% to below USD100 on Wednesday following the announcement of a ceasefire for the war. The contract rebounded 1 percent on Thursday as traffic through the Strait of Hormuz remained largely halted.

Earlier this week, China raised ceiling prices for retail gasoline and diesel by 420 yuan (USD61) and 400 yuan per metric ton, respectively.