According to a recent report by Bloomberg News, the Iranian regime is offering the cheapest oil to China among all the countries in the world. This development highlights the complex and secretive nature of Iran’s oil trade, particularly in the face of Western sanctions.
The Role of Malaysian Intermediaries
Bloomberg’s report, issued on Tuesday, August 27, 2024, sheds light on the growing role of Malaysian intermediaries in Iran’s oil sales to China. The Iranian regime is reportedly selling its high-quality light crude oil to Chinese refineries at a discount of $6 per barrel compared to the benchmark North Sea Brent oil price.
In contrast, Russia, despite facing similar Western sanctions, offers a discount of less than one dollar per barrel for the same type of oil to Chinese customers. This significant price difference underscores Iran’s desperation to maintain its market share in China, the world’s largest oil importer.
The “Teapot” Refineries: Iran’s Key Customers in China
The primary buyers of Iranian oil in China are small, independent refineries, often referred to as “teapots.” These refineries have been crucial for Iran as they are more flexible and less concerned with the potential repercussions of dealing with sanctioned oil.
To further incentivize these purchases, the Iranian regime not only offers substantial discounts but also covers the costs associated with using intermediaries in Malaysia, Singapore, Oman, Iraq, and the UAE. These intermediaries help to rebrand the oil, making it difficult to trace its true origin.
Disguising the Origin of Iranian Oil
The commodity information company Kpler reported that approximately 60% of Iran’s government oil is exported to China through Malaysian intermediaries, where it is falsely labeled as Malaysian oil. Chinese customs data also indicates a significant increase in the role of Malaysian intermediaries in facilitating these transactions.
In the first seven months of 2024, China imported an average of 1.23 million barrels of oil per day from Malaysia, a figure that far exceeds Malaysia’s total oil production capacity of around 570,000 barrels per day. In July alone, Chinese imports from Malaysia reached nearly 1.5 million barrels per day—almost three times Malaysia’s daily production.
These statistics suggest that the bulk of the oil labeled as Malaysian and entering China is, in fact, Iranian. Official Chinese customs records even claim that not a single barrel of Iranian oil entered the country during the first seven months of the year. If accurate, this indicates that all Iranian oil reaching China is being rebranded through intermediaries.
Limited Market Access Despite Discounts
Despite offering steep discounts, the Iranian regime’s oil exports to China have not seen significant growth in recent months. Data from oil tanker tracking companies like Vortexa reveal that the overall volume of Iranian oil shipments to China has remained stable, even as Malaysian intermediaries have taken over from others in facilitating these sales.
This stagnation comes despite an increase in Iran’s oil production last year. According to the International Energy Agency (IEA) and OPEC (the Organization of Petroleum Exporting Countries), Iran’s oil production surged to 3.35 million barrels per day in July 2024, up from less than 2 million barrels at the end of former U.S. President Donald Trump’s administration. However, this growth plateaued in the spring of 2024.
Before the U.S. imposed sanctions, Iran was producing around 3.8 million barrels of crude oil daily and exporting approximately 2.5 million barrels of crude oil and gas condensate. By contrast, recent data shows that Iran’s oil and gas condensate exports have stabilized at around 1.7 million barrels per day.
China: The Dominant Buyer of Iranian Oil
China continues to be the dominant buyer of Iranian oil, accounting for over 95% of Iran’s oil exports, with the remainder going to Syria. However, the global oil market is facing a slowdown in demand growth, which could further impact Iran’s oil revenues.
Global oil consumption is expected to increase by only one million barrels per day this year, a significant drop from the 2.5 million barrels per day growth seen last year. This deceleration is largely attributed to the Chinese market, where the rapid adoption of electric vehicles is reducing the demand for oil. In the first half of 2024, over half of the cars sold in China were electric, signaling a significant shift in the country’s energy consumption patterns.
The Financial Strain on Iran
The Iranian regime is under significant financial pressure. In May 2024, state-run newspapers in Iran revealed that the regime was selling oil to China at just $32 per barrel, despite the official budget estimating an oil price of $80 per barrel. With global oil prices fluctuating around $80 per barrel in recent days, the deep discounts offered by Iran highlight the regime’s struggle to maintain its oil revenue in the face of continued sanctions and a shrinking global market.
In conclusion, while Iran continues to sell oil to China at the lowest prices globally, the complex web of sanctions, intermediaries, and discounts underscores the challenges the regime faces in sustaining its oil exports. As global demand shifts and sanctions persist, Iran’s oil sector may continue to face significant hurdles.
Source » irannewsupdate