Iran is seeking higher prices for its crude destined for China

Iran is offering its crude to independent Chinese refiners at lower discounts to Brent as sellers seek higher prices for oil destined for the world’s biggest crude importer, unnamed sources familiar with the latest developments told Bloomberg.

Private Chinese refiners are key buyers of Iran’s sanctioned crude, and the two sides have established a mutually beneficial trade relationship. Iran gets to sell its crude that almost everyone avoids, while China’s independent refiners, the so-called teapots, get cheap oil.

As a result, China continued to buy cheaper crude from Iran even after the US reimposed sanctions on Iranian oil in 2018, and Beijing says it is not abiding by unilateral sanctions.

However, Bloomberg sources say there has recently been a conflict between Iranian sellers and Chinese buyers as Iran seeks $1 per barrel more for its crude grades compared to previous months.

In recent deals, Iran has offered Iranian Light crude at a discount of $3.50 a barrel to ICE Brent and Iranian Heavy – at a discount of about $7.50 a barrel to Brent.

Chinese refiners tell Bloomberg they are not sure why Iranian prices are rising.

However, rising tensions in the Middle East and a possible Israeli response to last week’s Iranian missile attack could have prompted Iran to seek higher prices. Or it could be that Chinese refiners have called for more supply ahead of a potential Israeli impact on Iran’s energy infrastructure, Bloomberg notes.

Last week, Iranian oil tankers were seen pulling away from Kharg Island, Iran’s largest oil export terminal, amid fears of an imminent Israeli attack on Iran’s most important crude export infrastructure.

Earlier this year, Iran and China were also at odds over the price of crude oil. China’s independent refiners delayed purchases of Iranian crude until February as the Islamic Republic demanded higher prices and upfront payments before loading the cargo. Eventually, the conflict was resolved and the Iranian vendors relented.

By Charles Kennedy for Oilprice.com

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