Chinese independent refineries return to crude market as prices fall: sources

Chinese small independent refineries in Shandong, which are frequent buyers of sanctioned crude, returned to the regular oil market due to uncertainties in Iranian and Russian supplies, Shandong-based refinery and trade sources told Platts, part of S&P Global Energy, on July 2.

Two independent refineries in central Shandong have taken at least two VLCCs of Middle Eastern crudes for August delivery, one carrying Iraqi Basrah Heavy and the other Qatari Al Shaheen, according to refinery and trade sources.

The last time these two plants took regular Middle Eastern crude was in March 2025, Platts data showed.

The procurement came as crude prices dropped amid the reopening of the Strait of Hormuz, while the US was in talks with Iran over lifting secondary sanctions and granting a 60-day general license for sanctioned Iranian oil.

"Prices of the regular crudes are cheaper than Iranian Light, so why not?" a Dongying-based refiner said, adding that "the current shift is temporary as independent refineries are always those that opt for the best option."

The Al Shaheen cargo was heard to have concluded at a discount of $5/b against the ICE Brent Futures on a DES Shandong basis, while Iranian Light was offered at a discount of $2/b on the same basis, according to refinery and trade sources.

But in the longer term, "We need to prepare as Venezuelan barrels have returned to the regular crude market, Iranian cargoes are likely to follow, and Russian oil may not be far behind," the Dongying-based refiner said.

Hengli Petrochemical Dalian Refinery, China's second-largest private refining complex, has shifted away from purchasing Iranian crude and bought a few regular cargoes as it seeks to be removed from US sanctions, Platts reported.

However, the falling crude prices also left cargoes that had been preliminarily booked at relatively high levels struggling to find buyers upon arrival.

The front-month Platts Dubai was at $66.3/b on July 1, compared with $92.8/b on June 2, Platts data showed.

In late June, a VLCC co-loaded with Angolan Dalia and Congolese Djeno crude was discharged at Yantai port in Shandong, according to S&P Global Commodities at Sea.

However, the cargo was still held by trading companies without a firm buyer, as the original offtaker had refused to take delivery, trade sources said.

The shipment was heard to have been purchased at a premium of above $5/b to ICE Brent futures on a DES basis, according to the trade sources.