Reports indicate Iran could be China’s oil weapon

Two reports out this week which could greatly impact oil prices indicate that leaders in Tehran are desperately urging China to purchase more Iranian crude: 

First, Reuters notes China continued importing Iranian oil in July for the second month since a US sanctions waiver ended, though at greatly diminished levels compared to the year prior, citing numbers from three data firms:

According to the firms, which track tanker movements, between 4.4 million and 11 million barrels of Iranian crude were discharged into China last month, or 142,000 to 360,000 barrels per day (bpd).

Another report by CNBC early this week said that Brent and WTI price could crash if China buys Iranian oil. 

Bank of America is warning oil prices could potentially crash by $30 a barrel if China ramps up Iranian crude purchases. Bank of America Merrill Lynch warns the oil price could slip sharply if China buys Iranian oil. BofA is keeping its $60 per barrel price estimate in place for 2020.

Currently the Trump administration puts Iran’s oil exports at a range of 50-70 percent going to China, and with around 30 percent going to Syria.

President Trump’s sanctions were meant to choke off Iran’s oil exports, its main source of income. But China and other countries have been defying them. 

With the US and UK now aggressively choking the Tehran to Damascus trade, given last month’s UK Royal Marine intercept of the Grace 1 tanker off Gibraltar, Tehran’s economic survival is ever more dependent on selling to China – a country powerful enough to bust US sanctions. 

Last week Iran’s Vice President Jahangiri made a direct appeal to Beijing and “friendly” countries to up their Iranian crude purchases in statements made during a Chinese diplomatic delegation visit. 

China indeed could unleash severe oil volatility on global markets if it decides to reverse course and up its intake of Iranian crude. The General Administration of Chinese Customs is set to publish exact details of July imports by origin in the last week of August.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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