The latest US sanctions on Iran, in response to its missile attacks on Israel, are expected to tighten crude flows to China and reduce the competitiveness of these barrels due to a shortage of ships and higher shipping costs in the near term, Chinese refinery and trade sources told S&P Global Commodity Insights on Oct. 14.
These sanctions, along with worries about further measures, if the Iran-Israel conflict escalates, could create prolonged uncertainty for China’s independent refiners, the biggest customers for Iranian crude, leading them to consider alternative supply options.
“Most of those vessels shuttled to China with Iranian barrels,” said a Shandong-based trade source with knowledge of the Iranian flows to China.
A Shandong-based independent refiner said sanctions complicate financing for affected cargoes, as “no bank will dare to handle cargoes shipped by a sanctioned vessel.”
In September, about 30 vessels loaded with Iranian crudes were discharged for China’s independent refineries, according to Commodity Insights estimates based on various market sources. Among these, six vessels were on the latest US sanctions list.
“With 23 vessels being sanctioned at one go, it is going to be challenging for dealers to find alternative carriers and redo administration works,” said Sijia Sun, associate director for downstream research and analysis at Commodity Insights.
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