China is facing increased competition and higher prices for Iranian crude oil following a temporary 30-day sanctions waiver issued by the United States on Iranian oil imports. The world’s largest crude oil importer has been the dominant buyer of Iranian barrels in recent years, leveraging discounted prices from sanctioned nations to save billions of dollars on energy costs. However, the brief sanctions relief could reshape the market dynamics for Iranian crude oil purchases.
Data from analytics firm Kpler for 2025 shows that China purchases more than 80 percent of shipped Iranian oil, with average imports reaching 1.38 million barrels per day last year. This volume represents approximately 13.4 percent of China’s total seaborne crude imports of 10.27 million barrels daily, according to the analytics company.
Independent Refiners Drive Chinese Iranian Crude Oil Demand
The primary buyers of Iranian crude oil are independent Chinese refineries, predominantly located in Shandong province. These facilities are attracted to the significantly discounted prices compared to non-sanctioned crude supplies. The independent refiners account for roughly a quarter of China’s total refining capacity and operate on razor-thin or sometimes negative profit margins.
Additionally, these refineries have faced mounting pressure recently due to weak domestic demand for refined products. Traders and industry experts note that major state-owned Chinese oil companies have refrained from purchasing Iranian crude since 2018-2019, leaving the market largely to smaller independent operators.
Pricing Dynamics and Market Implications
According to traders, Iranian light crude has been trading at approximately 8 to 10 dollars per barrel below the Brent crude price on the Intercontinental Exchange for delivery to China since December. This represents a widening discount compared to roughly six dollars in September. Calculations by Reuters and traders indicate that Chinese refineries save between 8 to 10 dollars per barrel when purchasing Iranian light crude instead of non-sanctioned Omani crude.
However, the discount expanded to more than 10 dollars per barrel in February. Following the initial American-Israeli strikes on Iran on February 28, trading of Iranian oil became scarce. Only a few transactions occurred based on a nine-dollar per barrel discount, according to market sources.
Meanwhile, the discount has narrowed slightly due to uncertainty surrounding supplies amid escalating conflict. Energy Aspects consulting firm estimated on March 19 that between 130 and 140 million barrels of Iranian oil were being transported at sea. This volume equals less than 14 days of current production cuts in the Middle East, according to the consultancy.
Sanctions Enforcement Intensifies
Washington reimposed sanctions on Tehran in 2018, and the administration of President Donald Trump has implemented several new sanctions packages targeting Iranian oil trade since returning to office in January 2025. Reuters reported that Trump’s sanctions included three independent Chinese refineries, undermining purchasing operations by several medium-sized independent companies fearing placement on the sanctions list.
In contrast, Beijing rejects unilateral sanctions and defends its trade with Iran as legitimate. Traders typically classify Iranian oil imported by China as originating from other countries, such as Malaysia, a major transshipment hub, and Indonesia. Chinese customs data has not shown any oil shipped from Iran since July 2022, according to official records.
The market outlook remains uncertain as the temporary sanctions waiver period progresses. Industry observers expect increased volatility in Iranian crude oil pricing as new buyers potentially enter the market, though the extent of competition for Chinese refiners and the duration of any market shifts remain unclear pending further policy decisions from Washington.
