Home Commodities Iran’s Oil Trade With China Is Reportedly Stalled Amid Pricing Dispute

Iran’s Oil Trade With China Is Reportedly Stalled Amid Pricing Dispute

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  • Iran’s oil trade with China has stumbled amid a price dispute, Reuters reported.
  • Iran wants to clip the previous discount of $10 a barrel to about $5 a barrel.
  • The smaller discounts would hurt the profits of China’s “teapot” refineries.

Iran is cutting back crude shipments to China, demanding higher prices on December and January deliveries of Iranian Light crude, Reuters reported on Friday. The move has led to a stalemate between the two countries, and could squeeze profits of the “teapot” refineries in China.

Iran is lowering its discount of $10 per barrel of Brent crude which was decided in November, to about $5 or $6, traders familiar with the transactions told Reuters. And those discounts could be trimmed even more, sources told the outlet. 

Brent crude was trading at $78.69 a barrel on Friday. 

According to Reuters, the extent of the current cutbacks in Iranian exports to China are unclear. Sources said that at least one Chinese buyer accepted the higher prices, purchasing a cargo with a $5.50-$6.50 discount.

Iran’s price hikes could be a result of relaxed sanctions on Venezuelan oil. As those shipments now sail towards the US and India, the amount of oil available for Beijing has dwindled, pumping up prices and reducing China’s power to negotiate over price. 

Higher Iranian oil prices could hurt the profits of “teapot” refineries in China which buy 90% of Iran’s total oil exports, Reuters reported. Teapot refiners, which are smaller, independent refineries in China, began importing oil from Iran in 2019 after state refineries shied away from Iranian oil following US sanctions, and soon became Tehran’s top clients. Overall, Iranian crude now makes up about 10% of Chinese oil imports.

More broadly, China has lapped up cheap oil from sanctioned countries like Iran, Venezuela, and Russia, snapping up oil shipments boycotted from the West, saving a lot of money in the process. Along with India, China has vacuumed up cheap Russian oil exports that hover over the price cap imposed on Russian oil by Western countries following the Russia’s invasion of Ukraine. 

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