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China May Be About to Step Up Iran Imports

Copyright © 2021 Energy Intelligence Group
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Industry sources say Beijing's push to secure sufficient winter fuel, along with its recent announcement of new crude import quotas, could lead to an uptick in China's imports of Iranian oil in the coming months.

Separately, officials said Iran will hold discussions with the EU in Brussels this week to address issues that have not been resolved at the stalled nuclear talks in Vienna.

Uncertainty about the future of the 2015 nuclear agreement has prevented Iran from increasing its oil exports because buyers want to avoid the consequences of breaking unilateral US sanctions.

But industry sources said the global energy crunch may have made China more willing to step up its purchases of Iranian oil in defiance of US sanctions.

China Seeks Winter Fuel

Beijing recently instructed state-owned energy companies to ramp up purchases of oil, gas and coal to prevent shortages this winter.

And it has just issued a new batch of crude import quotas for independent refiners — a move that is expected to boost Chinese crude imports, which have been running well below last year's levels.

Beijing never completely stopped importing Iranian oil imports in response to US sanctions, but it has refrained from buying large volumes.

And its imports did pick up somewhat after the incoming Biden administration announced it would seek to revive the nuclear deal with Iran, formally known as the Joint Comprehensive Plan of Action (JCPOA).

Steep Discounts

With crude prices recently hitting multiyear highs above $80 per barrel, Beijing might be willing now to buy more oil from Tehran, which has offered steep discounts to encourage buyers to set aside their qualms about US sanctions.

"I heard that China is ready to buy more crude from Iran because of the oil market situation," said one Iranian oil official.

Most of Iran's oil exports had been going to China, but they faltered in recent months as Beijing imposed import restrictions on independent refiners and a tax on "bitumen mix" — a term which was often used to disguise imports of sanctioned crude from Iran and Venezuela.

Data analytics firm Vortexa believes Chinese imports of Iranian crude averaged more than 500,000 barrels per day in the first nine months of 2021, including about 600,000 b/d in June, before the bitumen tax came into effect.

A Chinese oil trader said that after Beijing granted a new batch of import quotas to independent refiners last week, the country's crude imports — including cargoes from Iran — are likely to rise.

There are thought to be about 20 vessels with sanctioned crude floating off the coast of China, in addition to Iranian crude held in bonded storage. These barrels are likely to be released now that the new batch of import quotas has been issued, the trader said.

Talks in Brussels

Meanwhile, Iranian foreign ministry spokesman Saeed Khatibzadeh said the planned Oct. 21 meeting in Brussels would continue "constructive" talks in Tehran last week between Iranian Foreign Minister Hossein Amir-Abdollahian and EU Deputy Foreign Policy Chief Enrique Mora.

Iranian Deputy Foreign Minister Ali Bagheri-Kani will travel to Brussels for the meeting and will "definitely make comments on the resumption of nuclear talks" while a new negotiating team would be "introduced in the future," the spokesman added.

Iran has not yet signaled that it will return to Vienna for a seventh round of talks with the US and other parties to the 2015 Iran nuclear agreement.

However, the upcoming meeting in Brussels "can be viewed as a preparatory step toward resumption of real negotiations in Vienna," Mikhail Ulyanov, Russia's ambassador to the International Atomic Energy Agency (IAEA), tweeted on Sunday.

Vienna Talks Remain Stalled

Hopes for a resumption of the Vienna talks have dimmed in recent weeks, with Tehran apparently in no hurry to restart them since hard-line cleric Ebrahim Raisi took over as president in early August.

Raisi has previously expressed his support for renewed nuclear talks — but only if they lead to "the lifting of all oppressive sanctions." He has also said that Tehran will not negotiate "under pressure."

Iranian Foreign Minister Amir-Abdollahian said on Sunday that because the US had withdrawn from the 2015 nuclear agreement in 2018, the onus fell on Washington to take "serious steps" and lift sanctions before the Vienna talks resume.

Bullishness is set to persist in the European natural gas market through winter as tight supplies and colder weather buttress prices.
Fri, Nov 26, 2021