Iran oil stuck at sea surges as China's teapots turn to rival Middle East supplies, traders say

• Chinese teapots purchased 16-20.5 million barrels from Qatar, Iraq and UAE in recent weeks, their largest non-sanctioned Middle Eastern oil buy since the conflict began, displacing Iranian crude demand
• Iran exported approximately 62 million barrels since the June 14 ceasefire, with 52 tankers carrying crude and petrochemicals, but July imports to China dropped to 556,000 bpd, the lowest since January 2023
• Between 30-34.5 million barrels of Iranian oil were loaded from mid-June to early July, but sellers were described as 'slow' and 'stubborn' on pricing during funeral events for Supreme Leader Khamenei

Summary

Key Development: Iranian oil inventories at sea are accumulating as sales slow despite Tehran ramping up exports during an interim U.S. peace deal. China's independent "teapot" refiners have shifted to cheaper alternatives from Iraq, UAE, and Qatar, leaving Iranian barrels stranded.

Critical Figures

• Chinese teapot refiners purchased 16-20.5 million barrels from non-Iranian Middle Eastern suppliers in recent weeks
• Shenghong Petrochemical bought 12 million barrels from Iraq, Abu Dhabi, and Saudi Arabia
• Rival crude offered at $5-8/barrel discounts to ICE Brent versus Iranian crude at only $2-3/barrel discounts
• Iranian exports: 30-34.5 million barrels loaded June 15-July 10 (1.35 million bpd)
• February 2026 Iranian exports reached 60.7 million barrels (2.17 million bpd), up 20% from January
• 52 tankers carrying ~62 million barrels have sailed since the June 14 ceasefire
• China's July Iranian imports dropped to 556,000 bpd, lowest since January 2023

Main Players: Chinese teapot refiners (Shandong), Shenghong Petrochemical, European traders (Mercuria, Vitol), state majors (PetroChina International, Zhenhua Oil), Abu Dhabi National Oil Co.

Market Implications

• U.S. sanctions resumed this week, complicating Iranian sales further
• Iranian sellers deemed "stubborn" on pricing, making their crude paradoxically "the most expensive"
• Funeral events following Supreme Leader Khamenei's death slowed transactions
• Strait of Hormuz traffic disrupted again by U.S.-Iran tensions
• Traders expect Iranian discounts to widen to $4-5/barrel for August-September deliveries to attract buyers