China's Oil Imports from Iran Increase Significantly

Iran's oil exports have been increasing, providing relief to both Tehran and the global market, which has been worrying about the possibility of sanctions reducing Russian supply. Much of the increased Iranian oil appears to be going to China.

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According to data from Vortexa Ltd. and Kpler, two well-known shipping analytics firms, the Persian Gulf country’s oil exports climbed to about 1.3 million barrels a day in November, and last month held near the highest in four years.

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FGE, an energy-market consultant, has forecasted that Iran could potentially increase its shipments of crude and refined products by up to 200,000 barrels a day in 2021. This would be a significant increase from previous years, and could have a major impact on the global energy market.
As sanctions on Moscow threaten to tighten oil supply from a key producer, the US and its allies face a dilemma. They want low oil prices, but they have also been trying to curb Iranian exports in order to restrict the Islamic Republic’s nuclear program.

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Nuclear negotiations between Iran and world powers, including the United States, have all but broken down. U.S. Secretary of State Antony Blinken this week said Washington had all but given up on a deal that would ease oil sanctions on Iran in return for it curbing atomic activities.

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Some oil traders have speculated that the US may be content for Iranian oil shipments to continue, as they help to keep oil prices in check.
According to Vitol, the US may allow more Iran oil to flow even without a deal. This would be a major shift in policy, and could have a significant impact on global oil markets.

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It appears that the extra Iranian barrels are bound for China, the world’s biggest oil importer. According to figures from China’s customs administration, Beijing’s intake from the Asian nation surged to a record in December.

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Malaysian exports to China on that scale are not possible. They were almost three times the average daily crude output from the Southeast Asian nation over the first nine months of 2022. The flows also surpassed those of OPEC giants Iraq and the United Arab Emirates. "China's crude imports from Iran hit a new record in December 2022," Armen Azizan, an analyst at Vortexa, said in a report. A fax sent to China’s General Administration of Customs was not immediately returned.

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Malaysian waters have long been a hub for transferring crude and petroleum products from one tanker to another, sometimes masking the origin. In the past, barrels from Iran and Venezuela have been re-branded as oil from Malaysia and Oman.

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According to the official data, Malaysia was China’s third-biggest supplier of crude oil last month, behind only Saudi Arabia and Russia. Shipments from Iraq totaled 5.06 million tons, while flows from the United Arab Emirates were at 4.95 million tons in December.
In 2022, China imported a total of 35.7 million tons of crude from Malaysia, making the Southeast Asian nation the sixth-biggest supplier, ahead of Brazil, and OPEC members Kuwait and Angola.

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According to customs data, China has not imported any Venezuelan crude since 2019 and has only taken oil from Iran on four occasions since the end of 2020.
As of early last year, Iran had tens of millions of barrels of oil in floating storage. While many of those barrels were stored in Asian waters, it is unclear if Iran is also selling down its stockpiles in addition to increasing exports.