Iranian oil offers to Chinese buyers fall as US blockade bites, sources say

• Iranian crude pricing shifted abruptly from a $3/barrel discount to a $2/barrel premium over Brent as available supplies dwindled, with only about 30-40 million barrels remaining in Asian waters versus usual levels of 60 million barrels
• China's Iranian oil imports dropped to 785,000 bpd in June (lowest since February 2023) and further to 534,000 bpd in August, down from the 2025 average of 1.4 million bpd
• Chinese independent 'teapot' refiners, which account for one-fifth of China's refining capacity and are top buyers of sanctioned oil, are now seeking alternative supplies from Brazil and Iraq amid the supply shortage

Summary: Iranian Oil Offers to Chinese Buyers Decline Amid US Blockade

Key Developments:

Iranian crude oil offers to Chinese buyers have sharply declined for September-October delivery as a US blockade implemented July 13 significantly restricts Tehran's oil exports. The blockade, targeting Iran's shipping and ports following a breakdown in peace negotiations, aims to eliminate Iran's primary revenue source.

Critical Data Points:

• China's Iranian oil imports fell to 785,000 bpd in June (lowest since February 2023), rising slightly to 823,000 bpd in July before plunging to 534,000 bpd in August
• These figures represent a dramatic drop from 2025's average of 1.4 million bpd
• Iranian crude in floating storage has declined from 105 million barrels pre-blockade to approximately 80 million barrels
• Only 30-40 million barrels remain in Asian waters, half the usual levels
• No supertankers visibly crossed the Strait of Hormuz since mid-July, per Kpler data

Market Impact:

Pricing has reversed dramatically: Iranian Light crude shifted from a $3/barrel discount to a $2/barrel premium over ICE Brent within days, reflecting tight supply. Chinese independent "teapot" refiners in Shandong province—representing one-fifth of China's refining capacity and the largest buyers of sanctioned oil—face critical supply shortages and are seeking alternatives from Brazil and Iraq.

Forward Outlook:

US Treasury Secretary Scott Bessent threatened additional sanctions on Monday to pressure Iran. However, Chinese refiners, who purchase over 80% of Iran's shipped oil, may continue buying despite sanctions risks. China has rejected unilateral sanctions, with officials stating they won't resolve the conflict.

The supply crunch threatens a key feedstock for Chinese independent refiners as few laden Iranian tankers have bypassed the blockade.