Chinese refiners pay premium for Iranian oil after price drop

Chinese independent refiners have started purchasing Iranian crude oil at premiums to Brent crude for the first time in years, signaling a major shift in market dynamics following a decline in global oil prices and easing geopolitical tensions.

Iranian oil has traditionally traded at significant discounts due to international sanctions. However, recent developments, including a drop in benchmark prices and expectations of increased demand, have altered buying patterns. Trade sources revealed that at least two independent refiners in Dongying, a key refining hub in eastern Shandong, purchased Iranian Light crude at premiums of $1.50 to $2 per barrel over Brent earlier this week.

This marks a notable change compared to previous discounts of around $10 per barrel before the recent Middle East conflict. Industry insiders suggest this could be the first such premium purchase by Chinese “teapot” refiners since 2022.

The shift comes as global oil prices declined sharply, with Brent crude falling by about 13 percent to below $100 per barrel following the announcement of a ceasefire in the Middle East. Although prices later showed a slight rebound, market conditions encouraged refiners to secure prompt cargoes of Iranian crude.

At the same time, India is expected to receive its first shipment of Iranian oil in seven years after the United States temporarily waived certain sanctions due to regional disruptions.

Cargoes purchased by Chinese refiners are currently floating near China and are expected to be delivered within the month. Improved refining margins—driven by lower crude costs and higher domestic fuel prices—have further incentivized purchases.

Analysts believe these developments could reshape short-term oil trade flows, particularly if demand from major buyers like China and India continues to rise.