Chinese independent refineries are showing reluctance to increase their purchases of Iranian crude oil amidst escalating tensions in the region. Reports indicate that suppliers are attempting to raise prices due to fears of supply disruptions, particularly stemming from Iran’s threats to close the Strait of Hormuz amidst rising conflicts with Israel.
The uncertainty surrounding the stability of Iranian crude supplies is a primary concern for these refineries. Despite this tension, some refinery sources believe that the likelihood of Iran actually closing the Strait is minimal, as it would lead to significant geopolitical repercussions.
One independent refinery source noted that they do not anticipate stocking up on Iranian crude, suggesting the threats are not seen as credible enough to warrant a drastic response. As a result, while prices for Iranian cargoes have risen in recent weeks, there is no immediate rush among refiners to commit to significant purchases.
Rising prices have been attributed not only to the conflict but also to increasing insurance and freight costs for transporting oil from the Persian Gulf to China. The cost of moving crude has seen a substantial spike recently.
Overall, independent refiners have maintained a cautious stance, with many believing the conflict will not be prolonged and considering the market’s supply to remain adequate. Moreover, some refiners have expressed disinterest in purchasing future cargoes due to concerns about the backwardation in the market, which indicates a potential decrease in prices.
With crude utilization rates remaining low, independent refiners are exploring other feedstock options. Although they tend to prefer Iranian crude due to its competitive pricing, there may be an increasing interest in Russian and Venezuelan oils, which offer more stability and pose fewer risks regarding supply interruptions.