China state refiners considering resuming Iran oil imports, sources say

• Iranian oil loadings surged to around 1.6 million barrels per day between June 19-24, up from 340,000 bpd earlier in June, following the reopening of the Strait of Hormuz under the interim peace deal
• State refiners are examining banking, insurance, and shipping logistics needed to resume transactions, with NIOC as the sole contractual party and Russia's ESPO blend as the pricing reference
• Tepid domestic demand has driven recent cuts in China's crude imports and refinery throughput, making state firms hesitant despite the waiver, though Sinopec may emerge as a readier buyer due to supply cuts

Summary

Key Development: China's state-owned refiners Sinopec and PetroChina are considering resuming Iranian oil purchases for the first time since 2019, following a U.S. waiver announced Monday that permits global customers to buy Iranian oil and settle in U.S. dollars. The waiver followed a memorandum of understanding ending the U.S.-Israeli war with Iran.

Key Figures:

• Iranian oil loadings surged to approximately 1.6 million barrels per day (June 19-24) from 340,000 bpd in early June and 370,000 bpd in May
• Purchases would mark first state refiner transactions since 2019 when Trump reimposed sanctions

Market Constraints:

State refiners face several obstacles tempering their interest:

• Abundant alternative supplies from Saudi Arabia, Kuwait, Iraq, West Africa, Brazil, and Russia
• Weak domestic Chinese fuel demand and declining petrochemical consumption
• Uncertainty over banking, insurance, and shipping logistics
• Unclear which financial institutions will provide financing and clearing

Company-Specific Details:

Sinopec may emerge as the more likely buyer, having been Tehran's largest customer historically. The company has faced crude supply cuts and needs inventory replenishment. Both companies are examining necessary banking and shipping infrastructure.

Current Market Structure:

Chinese independent refiners ("teapots") remain primary Iranian crude buyers, using obscure middlemen and settling in yuan. Under the waiver, National Iranian Oil Co (NIOC) will be the sole contractual party, with Russia's ESPO blend serving as pricing reference.

Market Implications: The reopening of the Strait of Hormuz and potential normalization of Iranian oil flows could reshape Asian crude markets, though immediate impact appears limited by demand weakness and existing supply diversity.