Several of China’s independent refiners, known as “teapots,” are shifting toward Middle Eastern crude, purchasing rare spot cargoes of Abu Dhabi’s Murban oil for June delivery, Bloomberg reported Friday, citing unnamed sources familiar with the deals.
Two teapot refiners, Fuhai Group Co. and Shaanxi Yanchang Petroleum Group, each bought 1 million barrels of Murban crude. The purchases were made at a premium of around $5 per barrel over August ICE Brent futures, according to traders.
While the exact reason for the switch to Murban crude is unclear, market sources suggested two likely factors: a surplus of Middle Eastern supply leading to more competitive pricing, and a surge in fuel oil prices. Chinese teapots often use low-cost fuel oil as feedstock, but recent price hikes have made this practice less economical.
Another key factor is the disruption in the flow of discounted Iranian crude. This follows recent U.S. sanctions against two Chinese independent refiners. The sanctions are part of the U.S. “maximum pressure” campaign aimed at pushing Iran back into talks over its nuclear program.
Due to these sanctions, Chinese refiners have faced increased difficulty accessing Iranian crude. In April, at least five refineries in Shandong province—home to many teapots—halted purchases from Iran out of fear they might also be targeted, according to Reuters sources.
As geopolitical pressure mounts and traditional supply lines become riskier, Chinese teapots are exploring alternative crude sources to maintain operations and manage costs.
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