China Calls Halt to Iran Oil Orders

[Tom Kirkman + 8,860]

 

Reuters : Sinopec, CNPC skip Iran oil purchases for May to avoid U.S. sanctions

China Petrochemical Corp (Sinopec Group) and China National Petroleum Corp (CNPC), the country’s top state-owned refiners, are skipping Iranian oil purchases for loading in May after Washington ended sanction waivers to turn up pressure on Tehran, three people with knowledge of the matter said.

The United States has not renewed any exemptions from sanctions on Iran, taking a tougher line than expected on the expiry of the waivers. The waivers were granted last November to buyers of Iranian oil.

China is Iran’s largest oil customer with imports of 475,000 barrels per day (bpd) in the first quarter of this year, according to Chinese customs data.

Two of the sources said Sinopec and CNPC have skipped bookings for cargoes loading in May as the companies were worried that taking oil from Iran could invoke U.S. sanctions and cut them out of the global financial system.

 

[Old-Ruffneck + 1,239]

4 hours ago, Tom Kirkman said:

China is Iran’s largest oil customer with imports of 475,000 barrels per day (bpd) in the first quarter of this year, according to Chinese customs data.

I believe that almost half a mill bbl is sour crude, which KSA can easily replace and grin while doing so. Last count KSA was pumping around 8.3mbd and can crank up 2mbd without issue, and Iraq is now going to be a player. I believe the Chinese really didn't want to upset the USA's lock on Iranian oil. A lot in play but the world supply is still in good shape. 

[ceo_energemsier + 1,818]

10 hours ago, Tom Kirkman said:

 

Reuters : Sinopec, CNPC skip Iran oil purchases for May to avoid U.S. sanctions

China Petrochemical Corp (Sinopec Group) and China National Petroleum Corp (CNPC), the country’s top state-owned refiners, are skipping Iranian oil purchases for loading in May after Washington ended sanction waivers to turn up pressure on Tehran, three people with knowledge of the matter said.

The United States has not renewed any exemptions from sanctions on Iran, taking a tougher line than expected on the expiry of the waivers. The waivers were granted last November to buyers of Iranian oil.

China is Iran’s largest oil customer with imports of 475,000 barrels per day (bpd) in the first quarter of this year, according to Chinese customs data.

Two of the sources said Sinopec and CNPC have skipped bookings for cargoes loading in May as the companies were worried that taking oil from Iran could invoke U.S. sanctions and cut them out of the global financial system.

 

Hi Tom,

I have repeated the same statement, countries with US interests directly or indirectly, will stop buying Iranian barrels when the time comes. They may load up before deadlines but then they will avoid it like the plague for their own interests. Plenty of crude oil in the world to go around without Iranian barrels.

[ceo_energemsier + 1,818]

China’s crude conundrum: How to replace Iranian oil?

 

China’s monthly crude oil imports jumped to a record in April, and while it’s likely May will see a pullback, the broader question is how the world’s biggest importer is going to fare without supplies from Iran?

While China customs will only provide a detailed breakdown of imports later this month, vessel-tracking and port data compiled by Refinitiv do lend credence to the stockpiling view.

China’s imports from Iran were assessed at 830,000 bpd in April, up strongly from 540,000 bpd in March.

However, imports from Iran look like they are falling off a cliff in May. Only one cargo has been delivered so far and a mere three more are expected, for a likely total of about 260,000 bpd.

These figures are subject to review and may increase. But given the sailing time of at least three weeks between Iran and China, the chances are that any new cargoes departing in the coming days won’t arrive in May, even if Chinese refiners were to buy more Iranian oil in violation of U.S. sanctions.

In recent months China has accounted for about half of Iranian crude exports, meaning the loss of such a major customer will be a severe blow to Tehran.

Of course, all commentary on Iranian oil exports must come with a caveat that it’s possible, and perhaps even likely, that not all cargoes are being captured by the various vessel-tracking services, and that some are being effectively hidden in a sort of black market for crude.

But looking at what is visible, Iranian exports are dropping rapidly in May, with only seven vessels carrying about 13 million barrels having arrived at their destination or being currently en route.

CHINA’S CRUDE DILEMMA

Turning back to China, the vessel-tracking data underlines how much imports of crude are likely to pull back in May after the bumper April.

Imports are expected by Refinitiv to be around 9.5 million bpd, including those from both the seaborne market and from pipelines from Russia and Central Asia.

In the first eight days of May some 65.2 million barrels were offloaded at Chinese ports, according to Refinitiv, a rate of about 8.15 million bpd.

Pipeline imports are normally around 810,000 bpd, meaning that imports so far this month are running at around 9.25 million bpd, some 13 percent below what was achieved in April.

The pullback in May might not extend into later months as Chinese refiners are likely to finish maintenance turnarounds and then ramp up production for the summer demand peak.

Refiners have also been granted higher product export quotas this year compared to 2018, meaning they can import more crude in order to sell refined fuels to the export markets.

China’s exports of refined products were 6.17 million tonnes in April, down from March’s 7.21 million, but shipments in the first four months of the year are up 16.4 percent to the equivalent of about 1.5 million bpd.

While crude imports may take a breather in May, the chances are that China will continue its long-term upward trend, given rising domestic demand and increased exports on the back of excess refining capacity.

If China is severely curtailing imports from Iran, the question becomes where is it going to source the additional crude it requires.

Part of the answer is Saudi Arabia, Iran’s regional rival and a strong backer of Trump’s hard line against Tehran.

Imports from Saudi Arabia are expected by Refinitiv to rise to 1.47 million bpd in May from 1.2 million bpd in April.

However, it’s worth noting that this will still be below the 1.72 million bpd recorded in March, meaning the Saudis still have room to boost their supplies to China – especially if they relax output restrictions put in place to bolster prices.

But China faces not only the loss of Iranian supplies: Venezuelan oil is now also subject to U.S. sanctions.

Beijing also has a seemingly self-imposed reluctance to buy U.S. crude, even though these cargoes haven’t yet been subject to import duties as part of the ongoing trade dispute with Washington.

Only one tanker is scheduled to deliver a cargo from the United States to China in May, and so far there is only one further cargo currently being negotiated. Even if that comes to fruition, it will likely arrive in June, and possibly not until July.

For China, the cost of complying with U.S. sanctions is likely to be high. That’s not only because of a tighter crude market, especially for the heavier grades exported by Iran and Venezuela, but also because those suppliers with crude available are now likely to demand a premium.