By Charles Kennedy – Nov 05, 2024, 11:30 AM CST
Iran’s crude oil going to China these days is priced at its narrowest discount to Brent in five years as Iranian cargo loadings slumped last month amid fears that Israel would target Tehran’s energy facilities in response to the Iranian missile attack on Israel on October 1.
The discount of Iran Light crude to ICE Brent has now narrowed to below $4 per barrel, from $5-$6 a barrel earlier this year, trading and refinery sources have told Reuters.
The higher prices for Iran’s crude oil have been determined by lower cargo availability as Iran slowed loadings in the first half of October, waiting for the Israeli response.
Early last month, Iranian oil tankers were spotted moving away from Kharg Island, Iran’s biggest oil export terminal, amid fears of an imminent Israeli attack on the most important crude export infrastructure in Iran.
Reports also emerged in October that Iran is offering its crude to China’s independent refiners at narrower discounts to Brent, as sellers are seeking higher prices for the oil bound for the world’s top crude importer.
China’s private refiners are key buyers of Iran’s sanctioned crude, and the two sides have established a trade relationship favorable for both. Iran gets to sell its crude that nearly everyone else shuns, while China’s independent refiners, the so-called teapots, get cheap oil.
With Iranian prices now rising due to lower loadings last month, China’s independent refiners could further reduce processing rates toward the end of the year, as already low refining margins – even with the cheaper Iranian crude of recent months – are eating into their profits.
In a sign of rising Iranian prices, deals have been reportedly made at discounts of $3 and $3.80 per barrel to Brent on a delivered, ex-ship basis (DES), according to Reuters’s sources.
“There are very few offers for November or December deliveries as we heard about loading issues on the Iranian side,” a trading manager at an independent refiner in Shandong told Reuters.
By Charles Kennedy for Oilprice.com
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