About two months after the White House banned the purchase of Iranian oil, tankers are offloading millions of barrels of Iranian oil at Chinese ports, resulting to piles of cargoes. Bloomberg reports that the store of oil could lead to a push down of global prices, in the possibility that Chinese refiners decide to draw on it.
The presence of the stored oil is looming the market, while also enables Iran to continue transmitting oil nearer to potential buyers. Rachel Yew, an analyst at industry consultant FGE in Singapore reported that despite the detailed inspections, Iranian oil keeps being imported to Chinese bonded storage for months now; This provides benefits to possible sellers as the supplies are now placed next to key buyers, and could be easily sold if the sanctions are eased.
Up to now, Tehran is the owner of the bulk of Iranian oil in Chinese bonded tanks, and isn’t affected by sanctions. On the contrary, some of the crude belongs to Chinese entities that may receive it as part of oil investment. For instance, Bloomberg states that one of the Asian nation’s companies could enable fund a production project in Iran with the agreement to be repaid in kind; Yet, it’s not clear whether this is in breach of sanctions, so the companies are keeping it in bonded storage in order to prevent any inspections.
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Although the White House ended waivers, enabling some countries to keep importing Iranian oil, for the time being there are no exemptions to any country for the import of Iranian oil, but any nation that imports cargoes from the Persian Gulf breaches the sanctions.
As a result, the US should express how it will quantify the infringement of sanctions, according to Michal Meidan, director of the China Energy Programme at the Oxford Institute for Energy Studies.
Based on ship-tracking data, China received 12 million tonnes of Iranian crude from January through May. China will release June trade data that will include a country-by-country breakdown of oil imports in the coming days.
Concluding, Iran by placing crude oil into bonded tanks in China, can avoid committing a part of its tanker fleet. So, the Iranian crude to pressure markets and oil prices.
