Deliveries in incognito mode: Iran sends record amounts of oil to China

Deliveries in incognito mode: Iran sends record amounts of oil to China

Iran has “quietly” moved record amounts of crude oil to China, its leading buyer of black gold, in recent months, while India’s state-owned refineries have added Iranian oil to their annual import plans on the assumption that U.S. sanctions on the Islamic Republic will soon be eased. Reuters reported this today, March 8, citing its oil industry sources and Refinitiv data.

U.S. President Joe Biden is trying to resume talks with Iran on the 2015 nuclear deal, which his predecessor in the White House abandoned in May 2018, although Washington’s tough sanctions imposed by Donald Trump are still in place against Tehran, including its oil sector, the British news agency notes.

The National Iranian Oil Company (NIOC) has begun reaching out to customers across Asia since Biden took office on Jan. 20 to assess the potential demand for its oil, interlocutors told Reuters on condition of anonymity.

The sanctions have led to a sharp drop in Iranian exports to China, India, Japan, and South Korea since late 2018. The measures, as well as production cuts by other producers in the Organization of Petroleum Exporting Countries (OPEC) system, have contributed to the limited supply of high-sulfur crude from the Middle East to Asia, the largest market for liquid hydrocarbons for the Persian Gulf.

“They (the Iranians) talked to us. They said, ‘Very soon we hope to resume supplying oil.’ We said, ‘Inshallah,'” a Reuters source told an Indian refinery (“Inshallah” is an Arabic term that means “If God wills it,” or “If God wills it,” used to express that the speaker hopes something will happen. – Ed.).
Restoring Iranian supplies to India, the world’s third-largest importer of crude oil could reduce demand for spot cargoes, which recently increased after Iraq cut supplies and Kuwait reduced the duration of some of its oil contracts.

According to a government official, India, which has suffered as a major oil importer from the recent steady recovery of global fuel prices, expects Iranian supplies to return to the market in 3-4 months.

One Indian refiner said NIOC had previously made it clear that a formal agreement to supply Iranian oil to the South Asian giant’s market would be signed after the June presidential elections in the IRI.

Another source to topnews in the Indian oil industry said that the talks were “very preliminary” and that NIOC wanted to know whether their company would resume buying Iranian oil.

Unlike India, China has never completely stopped importing Iranian oil, Reuters noted. According to Refinitiv Oil Research, Iran has supplied about 17.8 million tons (306,000 barrels per day) of oil to China over the past 14 months, with volumes reaching record levels in January and February. Of these, about 75% were “indirect” imports, identified as oil from Oman, the United Arab Emirates (UAE) or Malaysia, which entered China mainly through ports in eastern Shandong province, where most Chinese private refineries are located, or through Yingkou port in northeastern Liaoning province. The remaining 25 percent of imports were recorded as official shipments from Iran, Refinitiv reported, as Beijing maintains a small volume of energy purchases from that country despite U.S. sanctions.

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“Volumes have started to rise since the last quarter of 2020, with Shandong province being the main receiving region, indicating that private refineries are the main consumers,” said Emma Li, an oil flow analyst at Refinitiv.
Tankers carrying Iranian oil typically turn off their transponders when loading and transporting to avoid detection under the U.S. oil embargo, but they can then be tracked via satellites near ports in Oman, the UAE, and Iraq. According to Lee, some tankers transfer some of their cargo to other ships near Singapore or Malaysia before sailing to China.

As topnews reported, according to OPEC’s monthly report published on February 11, Iran produced an average of 2.084 million barrels of crude oil per day in January, an increase of 62,000 BPD from the last month of 2020. According to the cartel, Iran’s average crude oil production for the last quarter of 2020 was 1.992 million barrels per day, an increase of about 44,000 barrels per day from the third quarter of last year. For all of 2020, Iran’s average crude oil production was 1.985 million barrels per day.

In addition to the devastating impact of the global Covid-19 coronavirus pandemic on the global oil industry, which has caused fuel prices to plummet, the Iranian oil industry has been under severe sanctions pressure in recent years from the United States, which left the nuclear deal with Tehran unilaterally in May 2018.

Iran is ready to increase oil production after Joe Biden came to the White House, having previously advocated for the United States to return to the 2015 Joint Comprehensive Plan of Action (JCPOA) on Tehran’s nuclear program (the nuclear deal). “We are still ready to dramatically increase oil production,” Iranian President Hassan Rouhani said in December 2020. As the head of government (the posts of president and prime minister are combined in IRI) recalled then, after the nuclear deal and the lifting of international and unilateral sanctions on Iran, the country was able to increase oil sales abroad to 2.5 million barrels per day.

Earlier Tehran officials pointed out that last year Iran was selling on average 600 to 700 thousand barrels of oil per day due to the US embargo on the oil exports from the Islamic Republic of Iran.