China's 'teapot' refiners mop up swelling Iranian crude, defying U.S. curbs

investing.com:

By Muyu Xu

SINGAPORE (Reuters) — Appetite for Iranian crude is growing in China, the world's biggest oil importer, after the extension of supply cuts by Saudi Arabia and Russia boosted global prices, while Tehran is stepping up output and exports despite U.S. sanctions.

Although China's «teapots», or small independent refiners, are stocking up on Iran's discounted oil as they exploit robust margins to fill strong seasonal demand, big state refiners are still keeping away.

Iran's crude exports of about 1.5 million barrels per day (bpd) stand at their highest in more than four years, with more than 80% shipped to China, data from consultancies FGE and Vortexa shows.

The export surge comes at a time when Washington and Tehran are working on prisoner swaps and ways to free up Iranian funds frozen overseas, leading some traders to speculate a softening of U.S. sanctions on Iranian crude could be in the offing.

«I think Iranians have been given unwritten confirmation… that there won't be any further sanctions on the crude buyers as long as they are engaged in the unofficial negotiations,» said Iman Nasseri, managing director of FGE.

He added that China's imports of Iranian crude could rise another 200,000 bpd to 300,000 bpd, from 1.2 million bpd to 1.3 million bpd now, if prices stay low, although volumes could be capped by buyers' risk appetite and payment constraints.

The U.S. continues to enforce the sanctions on Iran's oil and petrochemical industries, a senior State Department official told Reuters, adding that Iran's sanctions evasion was costly.

«We assess that the regime receives only a fraction of the market price for the oil it is able to sell.»

Chinese state-owned enterprises had not resumed import and refining of