Key Takeaways:
Iran shipped out more than 60 million barrels of crude after the June ceasefire, but Chinese independent refiners are buying cheaper oil from Iraq, the UAE and Qatar instead.
Iranian crude volumes floating at sea are swelling after the June ceasefire triggered a surge in exports, yet Chinese independent refiners — the primary buyers — have shifted to cheaper rival Middle Eastern grades, leaving cargoes stranded.
"Iranian oil ironically becomes the most expensive," one senior trader active in the Shandong market said, as discounts for Iranian Light crude held at $2 to $3 a barrel below ICE Brent while rival suppliers offered $5 to $8 discounts.
Between June 15 and July 6, about 30 million barrels of Iranian oil were loaded, equivalent to 1.35 million barrels per day, according to tanker tracker Vortexa Analytics. Kpler recorded an estimated 34.5 million barrels transiting the Strait of Hormuz on 21 tankers from June 14 through July 10. Since the ceasefire deal was announced June 14, 52 tankers carrying approximately 62 million barrels of Iranian crude and products have sailed, according to U.S. advocacy group United Against Nuclear Iran. Of those, 15 have reached the Singapore Strait, with three very large crude carriers already discharged.
The buildup of unsold Iranian barrels threatens to create a supply overhang just as the return of U.S. sanctions this week risks leaving Tehran with even more cargoes searching for buyers. China's Iranian oil imports in July have fallen to 556,000 barrels per day, the lowest since January 2023, Kpler data showed.
Chinese independent refiners based in the eastern oil hub of Shandong — known as teapots — bought 16 million to 20.5 million barrels of crude from Qatar, Iraq and the United Arab Emirates in recent weeks, traders said, their largest purchases of non-sanctioned Middle Eastern oil since the conflict began. Privately owned refiner Shenghong Petrochemical separately bought 12 million barrels of Iraqi, Abu Dhabi and Saudi crude, according to a trader familiar with the purchases.
The wave of non-Iranian cargoes displaced demand for Iranian barrels as rival Middle Eastern producers rushed to resume exports after the reopening of the Strait of Hormuz in late June. The shipments, sold on a delivered basis by European traders including Mercuria and Vitol, state majors such as PetroChina International and Zhenhua Oil, and Gulf producer Abu Dhabi National Oil Co., were priced at discounts of $5 to $8 a barrel to ICE Brent for August to September delivery.
Iranian Light crude discounts, by contrast, remained little changed at $2 to $3 a barrel, prompting two traders to describe sellers as "slow" and "stubborn." The week of funeral events that ended with the burial of slain Supreme Leader Ayatollah Ali Khamenei also slowed sales as offices were closed during the mourning period.
Iran's Export Surge and the Tanker Trail
Iranian exports averaged 2.17 million barrels per day in February 2026, a 20 percent increase from January, before dropping to 1.136 million barrels per day in March, according to UANI analysis. TankerTrackers.com said Tehran shipped out "no less than 10 million barrels of crude oil and fuel oil overnight" anticipating a possible resumption of the U.S. navy blockade.
The IEA said global oil supply rose by 4.1 million barrels per day in June but remained 9.4 million barrels per day below pre-war levels. The agency's 2027 forecasts imply supply will outweigh demand by 4.62 million barrels per day next year from an 860,000 barrel-per-day deficit this year, provided producers can restart fields and refiners can resume normal product shipments. However, an escalation in hostilities on July 7-8 "clouds the outlook and could upend the forecast," the IEA said.
Traffic through the Strait of Hormuz has slowed again this week after tit-for-tat attacks between the U.S. and Iran. Traders expect Iranian oil sales to pick up next week, with independent refiners anticipating $4 to $5 discounts for August to September arriving cargoes.
This article is for informational purposes only and does not constitute investment advice.
