Chinas Teapot Refineries Mitigate Oil Crisis Amid Iran War Tensions

China’s Oil Imports Remain Resilient Amid Middle East Tensions

China has continued to import oil from Iran despite the ongoing US-Israeli war on the country. The United States President Donald Trump announced plans for further aggressive strikes on Iran in a speech on Wednesday night, leading to a surge in oil prices. Brent crude prices rose by about 5 percent to $106.16 per barrel on Thursday morning.

According to data from Kpler, China bought more than 80% of Iran’s shipped oil in 2022. The country’s imports of Iranian crude were 1.4 million barrels of oil per day (mbd) in 2022, out of a total 10.4 mbd seaborne crude imports.

China has taken steps to secure its energy supply in recent years. In 2021, Chinese President Xi Jinping stated that the country would take its energy supply matters “into its own hands.” One key tactic used by China is through “teapot refineries,” which are smaller, independent facilities that stockpile oil reserves and increase imports from countries such as Iran, Russia, and Venezuela.

However, even with these measures in place, China’s oil supply is not entirely immune to the ripple effects of the war in the Middle East. According to Muyu Xu, a senior crude oil analyst at Kpler, China’s seaborne crude imports in March stood at 10.19 million barrels per day (mbd), down from 11.51 mbd in February.

While China has continued to buy Russian and Iranian crude, this is expected to have a limited impact on the country’s energy supply. Muyu noted that the loss of non-Iranian supplies from the Middle East will still be felt, particularly if prices rise substantially. State-owned refiners are concerned about compliance and operational risks, while teapot refiners are holding back from new purchases due to high prices and thin margins.

China’s oil imports from Russia have also been affected by the war. Several Russian oil-laden tankers have changed course on the open ocean to head for India instead of China. The relaxation of US sanctions is also expected to impact China’s oil imports from Russia.

Source: Al Jazeera