China’s Oil Import Hub Cracks Down on Sanctioned Tankers
Shandong Port Group Takes a Stand
In a move that could significantly impact the global oil market, Shandong Port Group has banned U.S.-sanctioned tankers from entering its ports in eastern China. This decision affects the province’s independent refiners, which are the largest importers of oil from countries under U.S. embargo, including Iran, Russia, and Venezuela.
A Major Player in the Oil Market
Shandong Province imported approximately 1.74 million barrels per day (bpd) of oil from these countries last year, accounting for about 17% of China’s total oil imports. The ban is expected to drive up shipping costs for independent refiners in Shandong, who are the main buyers of discounted sanctioned crude from these countries.
Tightening Sanctions
The ban comes on the heels of Washington’s decision to impose further sanctions on companies and vessels dealing with Iranian oil. President-elect Donald Trump is expected to tighten sanctions further on Iran, as he did during his first administration. This could slow down oil imports into China, the world’s largest oil importing nation.
Shandong Port’s Notice
A notice issued by Shandong Port on Monday, obtained by Reuters, forbids ports from docking, unloading, or providing ship services to vessels on the Office of Foreign Assets Control list managed by the U.S. Department of the Treasury. Shandong Port oversees major ports on China’s east coast, including Qingdao, Rizhao, and Yantai, which are key terminals for importing sanctioned oil.
Limited Impact Expected
In a subsequent notice, Shandong Port stated that it expects the shipping ban to have a limited impact on independent refiners, as most of the sanctioned oil is being carried on non-sanctioned tankers. However, the ban could still drive up costs for refiners in Shandong, who are already struggling with poor margins and sluggish demand.
The Shadow Fleet
The active shadow fleet transporting Iranian, Russian, and Venezuelan oil is estimated to be around 669 tankers. Of these, 250-300 tankers are typically involved in shipping Russian oil, excluding Iran’s biggest operator NITC and Russia’s leading tanker group Sovcomflot.
Tighter Sanctions Ahead
The outgoing Biden administration plans to impose sanctions on over 100 tankers involved in Russian oil, which could further tighten the tanker market. A switch to using non-sanctioned ships could inflate costs for refiners in Shandong, leading to higher prices for oil.
Market Impact
The price of Iranian crude sold to China hit a multi-year high last month as fresh U.S. sanctions tightened shipping capacity and drove up logistics costs. Iranian crude oil floating storage has risen to a 12-month high, and the Iranian export fleet is relatively stretched, which could lead to subsequent declines in Iran’s crude exports.
Leave a Reply