U.S. Blockade Tightens Grip on Iranian Oil Supplies to Chinese Refiners

On July 13 the United States re-imposed its blockade of Iran’s ports and shipping, halting new cargoes from leaving the Persian Gulf. Kpler data show no super-tankers carrying Iranian crude have crossed the Strait of Hormuz since that date, and floating-storage volumes have fallen from about 105 million barrels to roughly 80 million barrels. Of the remaining oil, about 40 million barrels sit near Singapore, but market participants say only two super-tanker cargoes (?10 %) remain unsold. Iranian crude offered to Chinese buyers shifted from a discount of roughly $3 per barrel to a premium of $2–$3.50 above ICE Brent within a week. Kpler’s provisional figures record Chinese imports of Iranian oil at 785,000 bpd in June, rising to 823,000 bpd in July, then dropping to an estimated 534,000 bpd in August – the lowest level since February 2023.

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The independent refiners in China’s eastern Shandong province, known as “teapots,” have traditionally bought the bulk of sanctioned Iranian crude. With the supply squeeze, they are turning to alternative feedstocks such as Russian Urals crude, fuel oil, or Brazil’s Lapa crude, and some risk cutting run-rates in October if inventories run thin. The tightening market has prompted analysts to warn that buyers could face virtually no new Iranian supplies for late-September deliveries.

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U.S. Treasury Secretary Scott Bessent announced that the United States will impose “the toughest sanctions in history” on Iran, with details to be released in the coming days, aiming to pressure Tehran to reopen the Strait of Hormuz. A source at a Chinese teapot plant noted that, despite the threat, refiners previously sanctioned for processing Iranian oil expect to continue purchases, suggesting new sanctions may have limited immediate impact on demand.

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• “Given the thin Iranian availability amid the US blockade, Chinese teapots are now looking beyond Russia and Iran,” — Sun Jianan, a senior oil analyst at Energy Aspects

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• “Chinese teapots will need to step up purchases of alternative feedstocks, such as Russian Urals crude or fuel oil, as ESPO supplies were sold out weeks ago, or risk cutting throughput in October when their inventories run thin,” — Muyu Xu, crude oil analyst

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• “Buyers could face virtually no new Iranian supplies available for late-September delivery onwards,” — Muyu Xu, crude oil analyst

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These statements illustrate the market’s reaction to the blockade and the strategic calculations of both U.S. officials and Chinese refiners.

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