Iran is being forced to discount its already cheap crude even more as a top ally gains a bigger foothold in the key Chinese market, Bloomberg reported.
China has become an important destination for Russian oil. That’s led to increased competition with Iran in one of the few remaining markets for its crude shipments, which have been significantly curtailed by U.S. sanctions.
Iranian oil has been priced at nearly $10 a barrel below Brent futures to put it on par with Urals cargoes that are scheduled to arrive in China during August, according to traders. That compares with a discount of about $4 to $5 prior to the invasion. Iran’s Light and Heavy grades are most comparable to Urals.
China’s official data only lists three months of imports from Iran since the end of 2020, including in January and May this year, but third-party figures indicate a steady flow of crude. After a slight decline in April, imports have been over 700,000 barrels a day in May and June, according to Kpler. Industry consultant FGE says Russian Urals have displaced some Iranian barrels, however.
Russian exports to China surged to a record in May, with the OPEC+ producer overtaking its cartel ally Saudi Arabia as the top supplier to the world’s biggest importer. While Iran has cut its oil prices to remain competitive in the Chinese market, it’s still maintaining robust flows, likely in part due to rising demand as China eases strict virus restrictions that had crushed consumption.
