China’s refiners pivot to Iraqi crude amid US Iran sanctions

China’s independent refiners are shifting their focus to Iraqi crude oil as US sanctions severely restrict supplies from Iran, their primary source. The blockade has pushed these refiners, particularly smaller ‘teapot’ refiners in Shandong province, to seek alternative suppliers. Recent purchases of Iraq’s Basrah Heavy and Basrah Medium grades for November delivery show premiums reaching $18 a barrel above ICE Brent prices, according to traders.

The rush for Iraqi crude highlights a scramble for immediate supplies rather than a sign of recovering Chinese oil demand. State-owned refiners have already cornered the market for Russian barrels, leaving private refiners with limited options. The premiums paid for Iraqi crude underscore the urgency of securing alternative sources amid the US-led supply squeeze.

Traders with knowledge of the deals note that the purchases are driven by necessity rather than a sustained shift in demand patterns. The premiums reflect the tight supply situation, as refiners strive to avoid disruptions in their operations. This strategic pivot could have lasting implications for China’s oil import mix, depending on how long the US blockade on Iranian supplies persists.