Iranian crude inflows were seen in China's official data in December for the first time in 2021, at 260,312 mt or 61,551 b/d, General Administration of Customs data released Jan. 20 showed.
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The last time Iranian supply was seen in GAC data was in December 2020, at 518,758 mt.
The cargo of Iranian crude last month has been stored in bonded storage in southern China's Guangdong province, sources with knowledge about the matter said, adding that almost all the barrels from Iran released by GAC since the sanctions were enforced were in bonded storage.
However, the actual volume imported from Iran was more than that.
S&P Global Platts data showed that around 22.8 million mt of Iranian crudes were imported under various covers into China's Shandong province in 2021, where most independent refineries are located.
Last year, at least 10.6 million mt of the total supplies from Iran were shown as cargoes originating from Oman or the UAE, in addition to other Malaysian blended grades. This compares to a miniscule figure in 2020, when refiners imported bitumen blend occasionally, and on an ad-hoc basis, from Iran as a feedstock supplement.
As a result, China's crude imports from Oman and Malaysia surged 18.3% and 48.4%, respectively, year on year in 2021, GAC data showed.
Iranian vs. Russian crude
Iranian crudes are competitively priced. Currently, Iranian crudes were offered at minus $5.50/b against the ICE Brent futures on a DES Shandong basis, while ESPO was offered at $4/b on the same basis, according to trade sources.
However, the premiums of Iranian crudes are expected to increase following the recent uptick in crude prices, according to a trade source, adding that there would less cargoes to arrive in February due to the maintenance in Iran.
In December, crude imports from Russia rose 8% month on month to 7.24 million mt, or 1.71 million b/d, overtaking Saudi Arabia to become China's top crude supplier. The volume was also the highest in nine months since March 2021, when Russian imports totaled 7.44 million mt, the GAC data showed.
Platts data showed independent refineries cut their Russian crude imports, especially Sokol, by 18.3% on the month to 1.9 million mt in December, suggesting the state-owned companies were the main contributors to push up the inflows.
Saudi Arabia tops in 2021
However, Saudi Arabia was the top supplier for the full-year 2021, despites its shipments falling 10.5% from November to 6.62 million mt or 1.57 million b/d in December, and receding 4.5% year on year.
Crude inflows from Saudi Arabia in 2021 rose 3.1% year on year to 87.57 million mt or 1.76 million b/d, and comprised 17.1% of China's total crude imports, increasing from 15.7% in 2020.
This helped the Middle East increase its share of China's imports to 50.2% in 2021 from 46.8% in 2020, the GAC data showed. China's crude inflows from the oil-rich region rose 1.6% year on year to 257.61 million mt, or 5.17 million b/d.
China's total crude imports fell 5.4% year on year to 512.83 million mt in 2021.
The Middle East is expected to continue with its dominant crude market share in China as more than 840,000 b/d of integrated refining capacity would come on stream in 2022, including the 200,000 b/d new crude distillation unit in Zhejiang Petroleum & Chemical and the 320,000 b/d greenfield Shenghong Petrochemical that are designed to crack Middle Eastern crudes.
China's crude imports from the US fell 41.9% year on year to 11.47 million mt or 230,388 b/d in the year amid no developments in the Phase 1 trade deal between the US and China signed in January 2020. The value of the US crude inflow totaled $5.63 billion in 2021, down 12.1% from $6.4 billion in 2020, the GAC data showed.
"The 2021 inflows from US reflected trade economy rather than the trade deal requirement between the two countries," a China-based trader for US crude said.
Under the Phase 1 deal with the US, China had committed to buy $18.5 billion more US energy products in 2020 than it did in 2017 and $33.9 billion more in 2021 than in 2017, with expectations of similar volumes through 2025.
China's top crude suppliers:
(Unit: million mt)
*Conversion: 7.33 barrels = 1 mt
Source: General Administration of Customs