China Explores Iranian Oil Deals Amidst Middle East Conflict and US Waiver

Beijing is signaling a potential increase in Iranian crude oil purchases as Chinese state-owned refiners begin exploring deals following a recent U.S. Decision to allow the sale of oil already loaded onto tankers. This move by Washington aims to mitigate potential price surges stemming from the ongoing Middle East conflict, creating a window of opportunity for China, a major consumer of Iranian oil.

US Waiver and China’s Position

The United States issued a 30-day sanctions waiver on Iranian oil, a decision that has prompted Chinese refiners to reassess potential purchases. Representatives from the National Iranian Oil Company (NIOC) and intermediary traders have reportedly been in contact with Asian refiners, including those in China, to gauge interest.

China’s Reliance on Iranian Oil

China is heavily reliant on Iranian oil imports, purchasing more than 80% of Iran’s shipped oil in 2025, according to data from analytics firm Kpler. Last year, China imported an average of 1.38 million barrels per day of Iranian oil, representing approximately 13.4% of its total 10.27 million barrels per day of oil imports by sea. This reliance has allowed China to save billions on its import bill, particularly given its significant purchases from Venezuela and Russia, all countries facing Western sanctions.

Sinopec’s Stance

Despite the broader exploration of Iranian oil deals, China’s state-run refiner Sinopec has stated it does not intend to purchase Iranian oil. This indicates a cautious approach from at least one major player in the Chinese refining sector.

Teapot Refiners and Pricing

Chinese independent refiners, often referred to as “teapots” – primarily located in Shandong province – have historically been the main buyers of discounted Iranian crude. These refiners, which account for roughly a quarter of China’s refinery capacity, are drawn to the lower price point. Iranian Light crude has been trading at a discount of $8 to $10 per barrel below ICE Brent on a delivered basis to China since December, increasing from a $6 discount in September.

Competition and Future Outlook

The U.S. Sanctions waiver is expected to increase competition for Iranian oil and potentially drive up prices. China, having been a key buyer of sanctioned oil from Iran, Venezuela, and Russia, will likely navigate this changing landscape carefully, balancing its energy needs with geopolitical considerations.