Tankers are offloading hundreds of thousands of barrels of Iranian oil into storage tanks at Chinese ports, creating a hoard of crude sitting on the doorstep of the world’s largest purchaser.
Two and a half months after the US banned the purchase of Iran’s oil, the nation’s crude is constant to be sent to China where it’s being put into what is referred to as “bonded storage,” say individuals familiar with operations at a number of Chinese ports. This oil doesn’t cross local customs within the nation’s import data and isn’t necessarily in breach of sanctions. And while it stays out of circulation, for now, its appearance is looming over the market.
The store of oil has the ability to push down global prices if Chinese refiners determine to draw on it, even as Organization of Petroleum Exporting Nations and allies curb production amid slowing growth in major economies. It additionally permits Iran to keep pumping and move its oil nearer to potential consumers.
“Iranian oil shipments have been flowing into Chinese bonded storage for a few months now, and proceed to do so despite increased scrutiny,” mentioned Rachel Yew, an analyst at business consultant FGE in Singapore. “We all can see why the producer would want to do so, as a build-up of supplies close to key buyers is beneficial for a seller, particularly if sanctions are eased at some point.”