Iran endures longest gap in China's oil buying in three years

By Julian Lee on 9/13/2018

LONDON (Bloomberg) -- Iran just endured the longest gap without sending oil to its biggest customer in at least three years as imminent U.S. sanctions pile pressure onto Tehran.

Two supertankers left Iran’s biggest export terminal bound for China late Wednesday, ending an 18-day hiatus, according to ship-tracking data compiled by Bloomberg.

While the pause in shipments probably doesn’t mean China will to bow to pressure from U.S. President Donald Trump -- Beijing is said to have resisted such curbs -- it might indicate that the Asian country’s refineries want better terms for Iranian cargoes.

Regardless of the motivation, flows to China have plunged at a difficult moment for Iran, with buyers including South Korea, France and others either reducing or completely stopping their purchases due to U.S. pressure. Tanker tracking compiled by Bloomberg indicates that OPEC’s fourth-largest exporter is already having to store bbl amid dwindling demand.

China was the largest buyer of Iranian crude last year, accounting for almost a third of Iran’s crude and condensate exports. The Middle East country’s exports so far this month slumped to around 1.3 MMbpd. They were as high as 3 MMbpd back in 2016, the tanker tracking data show.

The Dino I and Dune, which can haul 4 MMbbl between them, departed Kharg Island in the northern Persian Gulf within an hour of each other late Wednesday. Before that, the last vessel to make the journey was the supertanker Starla, which left on Aug. 25 carrying two MMbbl to Ningbo.

The pause in shipments to China has coincided with the return of Iranian oil stored on tankers close to the country’s export terminals. There are currently eight tankers holding 14 MMbbl of Iranian crude or condensate, a form of light crude extracted from gas fields, anchored in the Persian Gulf.

On average during the first eight months of this year Iran shipped 660,000 bpd of oil to China. To maintain that rate of purchases, five to six supertankers, also known as very large crude carriers, should have left for China in the past 18 days.

Previously, the longest gap between vessels leaving Iran for China was 15 days between March 20 and April 4, but most of the time it’s three days or less. The last big interruption came after a flood of crude on the trade route in the first half of March. That’s not been the case this time. The tanker-tracking data compiled by Bloomberg start in July 2015.

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