Teapots' Run Rates May Take a Hit as Crude Supply Scarcity Bites

China's private oil refiners, known as 'teapots', may cut their processing runs in the coming weeks due to a scarcity of traditional crude supply sources and rising costs. This could have a negative impact on demand in the world's largest importer.

The teapots face a twin challenge: shipments from both Iran and Venezuela are under pressure due to US naval blockades and redirection of flows. Meanwhile, crude futures have been rallying, with Brent hitting nearly $100 a barrel.

According to Energy Aspects Ltd analyst Jianan Sun, the teapots' margins have fallen back to breakeven levels from about $10 a barrel in early July. This means they will struggle to afford a full shift to mainstream grades.