This is not a paywall.

Register for free to continue reading.

We made a promise to you that we’ll never erect a paywall and we intend to keep that promise. We also want to continually improve your reading experience and you can help us do that by registering with us. It’s quick, easy and will cost you nothing.

Nearly there! Create a password to finish up registering with us:

Please enter your password or get a login link if you’ve forgotten

Open Sesame! Thanks for registering.

Ramaphosa's energy plan Webinar banner

We'd like our readers to start paying for Daily Maverick

More specifically, we'd like those who can afford to pay to start paying. What it comes down to is whether or not you value Daily Maverick. Think of us in terms of your daily cappuccino from your favourite coffee shop. It costs around R35. That’s R1,050 per month on frothy milk. Don’t get us wrong, we’re almost exclusively fuelled by coffee. BUT maybe R200 of that R1,050 could go to the journalism that’s fighting for the country?

We don’t dictate how much we’d like our readers to contribute. After all, how much you value our work is subjective (and frankly, every amount helps). At R200, you get it back in Uber Eats and ride vouchers every month, but that’s just a suggestion. A little less than a week’s worth of cappuccinos.

We can't survive on hope and our own determination. Our country is going to be considerably worse off if we don’t have a strong, sustainable news media. If you’re rejigging your budgets, and it comes to choosing between frothy milk and Daily Maverick, we hope you might reconsider that cappuccino.

We need your help. And we’re not ashamed to ask for it.

Our mission is to Defend Truth. Join Maverick Insider.

Support Daily Maverick→
Payment options

Iran slashes the cost of its oil to compete with Russia...

Business Maverick

Business Maverick

Iran slashes the cost of its oil to compete with Russia in China

Processing facilities stand at the new Phase 3 facility at the Persian Gulf Star Co. (PGSPC) gas condensate refinery in Bandar Abbas, Iran.
By Bloomberg
04 Jul 2022 0

Iran is being forced to discount its already cheap crude even more as a top ally gains a bigger foothold in the key Chinese market.

China has become an important destination for Russian oil as Moscow seeks to maintain flows following the fallout from its invasion of Ukraine. That’s led to increased competition with Iran in one of the few remaining markets for its crude shipments, which have been significantly curtailed by US sanctions.

Russian exports to China surged to a record in May, with the OPEC+ producer overtaking its cartel ally Saudi Arabia as the top supplier to the world’s biggest importer. While Iran has cut its oil prices to remain competitive in the Chinese market, it’s still maintaining robust flows, likely in part due to rising demand as China eases strict virus restrictions that had crushed consumption.

“The only competition between Iranian and Russian barrels may end up being in China, which would work entirely to Beijing’s advantage,” said Vandana Hari, founder of Vanda Insights in Singapore. “This is also likely to make the Gulf producers uneasy, seeing their prized markets taken over by heavily discounted crude.”

China’s official data only lists three months of imports from Iran since the end of 2020, including in January and May this year, but third-party figures indicate a steady flow of crude. After a slight decline in April, imports have been over 700,000 barrels a day in May and June, according to Kpler. Industry consultant FGE says Russian Urals have displaced some Iranian barrels, however.

Iranian oil has been priced at nearly $10 a barrel below Brent futures to put it on par with Urals cargoes that are scheduled to arrive in China during August, according to traders. That compares with a discount of about $4 to $5 prior to the invasion. Iran’s Light and Heavy grades are most comparable to Urals. 

China’s independent refiners are major buyers of Russian and Iranian crudes, and cheap supplies are important because they’re constrained by rules around exporting fuels, unlike state-run processors. Known as teapots, they are not given quotas to ship fuels to overseas markets, where prices have surged on a supply crunch. Instead, they supply the domestic market and have incurred losses on refining in recent months as virus lockdowns sapped demand.

Africa squeezed

Less-sulphurous and higher-quality Russian ESPO crude from the eastern port of Kozmino is more expensive than Iranian oil, according to traders, but is still cheaper than comparable barrels from the Middle East. China’s willingness to take discounted oil despite its origin is curbing flows from other suppliers.

West Africa has been one of the hardest hit, particularly supplies from Angola, Gabon and the Democratic Republic of Congo, according to Kpler. A blowout in a key pricing structure has contributed to the higher cost of importing African crude, which has to be shipped over a much longer distance to get to China.

“Costs are a big concern mainly for the teapots,” said Michal Meidan, director of China Energy Programme at the Oxford Institute for Energy Studies. “This is likely to remain the trend until the economy starts to pick up and activity resumes, at which point demand for all crudes will increase.” BM


Comments - share your knowledge and experience

Please note you must be a Maverick Insider to comment. Sign up here or sign in if you are already an Insider.

Everybody has an opinion but not everyone has the knowledge and the experience to contribute meaningfully to a discussion. That’s what we want from our members. Help us learn with your expertise and insights on articles that we publish. We encourage different, respectful viewpoints to further our understanding of the world. View our comments policy here.

No Comments, yet

Please peer review 3 community comments before your comment can be posted