Chinese refiners seek Iranian oil after price drop

Some Chinese independent refiners, often referred to as “teapots,” began looking for prompt cargoes of Iranian crude on April 8 after a sharp decline in global oil prices, according to market participants. The renewed buying interest followed a move in Brent crude futures below $100 per barrel, a level last seen on March 11.

Officials linked the price move to a political development: U.S. President Donald Trump announced a two-week ceasefire with Iran and said the Strait of Hormuz had reopened. The combination of lower benchmark prices and improved shipping access helped shift near-term purchasing calculations for refiners that had been cautious in recent weeks.

Before April 8, many of these independent refiners had largely stayed away from Iranian crude since the U.S.-Iran conflict began in late February, when oil prices jumped. During that period, Washington temporarily waived sanctions on Russian and Iranian crude at sea, which removed earlier price incentives and narrowed the economics that had supported purchases.

Pricing for Iranian barrels has also changed materially. Offers for Iranian Light are now being discussed at parity or at a slight premium to ICE Brent, compared with a $10 per barrel discount that was available before the conflict, market participants said. That shift reduces the traditional cost advantage of Iranian supply and makes refiners more sensitive to movements in global benchmarks and freight conditions.

Policy signals from Beijing have added another factor. China’s state planner recently urged independent refiners to keep fuel production steady to protect domestic supply, even as margins have been under pressure. Refining losses averaged 143 yuan ($20.94) per metric ton in March, highlighting the financial strain facing smaller processors.

To support crude intake and continued operations, China issued new crude oil import quotas for independent refiners totaling about 55 million metric tons (401.5 million barrels). Market participants said the new quotas were a key reason some teapots were again assessing near-term cargoes, as quota availability can determine whether refiners can bring in additional crude volumes.

Several details remain uncertain. The breakdown of quota allocations by individual refiner has not been specified, and it is also unclear how quickly the new quotas will be used. With Iranian Light now priced around ICE Brent rather than at a deep discount, refiners’ appetite may depend on how long Brent remains below $100 per barrel and whether shipping through the Strait of Hormuz continues without disruption.