China’s imports of Russian Far East and Iranian crude oil should increase in March as tankers not facing US sanctions take over for those affected by US restrictions, trade sources and analysts said. These tankers, attracted by high freight rates, have filled the gap to keep trade going and have alleviated supply fears that had pushed global oil prices higher.
The US has levied multiple rounds of sanctions against entities engaged in Russian and Iranian oil trading since October. Such restrictions had disrupted exports to major importers such as China and India. The newly introduced sanctions package on Jan. 10 targeted more than 140 oil tankers that accounted for roughly 42% of Russia’s total seaborne crude exports. This led to higher shipping costs.
Meanwhile, 11 newly-added non-US-sanctioned tankers are joining the Russia-China crude oil route, LSEG data shows, including the ships Serena and Naxos, which previously carried Russian oil to India.
And the increase in freight has led to reinvestment in more vessels by shipowners, contributing to the stabilization of the supply chain. The high profits in that business have led owners to divert clean tankers to move Russian crude, according to a trader dealing with a Russian supplier.
Shipping rates from Russia’s Far East to northern China are now anywhere between $4 million and $4.5 million, traders say. These elevated costs have not so far hampered liftings, with February’s ESPO crude loadings bouncing back to an average of 920,000 barrels per day (bpd) compared to 860,000 bpd in January. This is up from a February low, when ESPO deliveries were forecast to drop to 780,000 bpd.
In one key deal, the Very Large Crude Carrier (VLCC) Daban loaded two million barrels of Sokol crude on three smaller tankers in early February. Previously employed for hauling Iranian oil to China, this ship was last spotted sailing for Yantai.
Ingen from Shandong, Tokaj from Eastern, Janus from Zhoushan in east China, newly emerged terminals have revitalized the cost of off-loading these shipments. However, a key terminal operated by Wintime Energy at Huizhou port has temporarily stopped receiving crude shipments that are under sanction. Wintime Energy has not responded to inquiries, and the reason behind this decision is not clear.
In addition to the impact of shipping logistics, a reduction in Russian refinery output caused by Ukrainian drone attacks has also caused an uptick in crude exports, said Richard Bronze, head of geopolitics at Energy Aspects. In addition, Urals crude shipments to Turkey and other locations have declined after the sanctions, and more Urals cargoes have been diverted to China.
Kpler data also points to an increase, with Iranian crude deliveries to China hitting 771,000 bpd in February compared with 692,000 bpd in January. The difference between the two figures stems from differences in the methodologies employed to track shipments, particularly those involving the so-called shadow fleet.
Since the end of January at least eight of these newly classified VLCCs — either newly added to the dark fleet or dormant since the start of 2024 — have been sent on ship-to-ship transferral missions from Malaysia to China, according to Vortexa’s Li.
Despite this bounce, future exports of Iranian oil to China could be under renewed pressure. Analysts say tighter US action, led by former President Donald Trump, could cause delays in Iranian exports. Over the long term, this could also push Iran to reduce production.
The US has levied multiple rounds of sanctions against entities engaged in Russian and Iranian oil trading since October. Such restrictions had disrupted exports to major importers such as China and India. The newly introduced sanctions package on Jan. 10 targeted more than 140 oil tankers that accounted for roughly 42% of Russia’s total seaborne crude exports. This led to higher shipping costs.
Greater Activity of Tankers in Russian Crude Trade
The increase in freight rates for moving ESPO crude from Russia’s Kozmino port to China reached three times the initial rate, with at least 17 non-sanctioned tankers having taken up the trade track from Jan 11 to Feb 20, said Vortexa analyst Emma Li. Some of these tankers had been transporting oil from the Baltic area, while the others were moving refined oil products.Meanwhile, 11 newly-added non-US-sanctioned tankers are joining the Russia-China crude oil route, LSEG data shows, including the ships Serena and Naxos, which previously carried Russian oil to India.
And the increase in freight has led to reinvestment in more vessels by shipowners, contributing to the stabilization of the supply chain. The high profits in that business have led owners to divert clean tankers to move Russian crude, according to a trader dealing with a Russian supplier.
Shipping rates from Russia’s Far East to northern China are now anywhere between $4 million and $4.5 million, traders say. These elevated costs have not so far hampered liftings, with February’s ESPO crude loadings bouncing back to an average of 920,000 barrels per day (bpd) compared to 860,000 bpd in January. This is up from a February low, when ESPO deliveries were forecast to drop to 780,000 bpd.
Increasing STS Transfers and Other Delivery Pathways
Besides direct shipments, ship-to-ship (STS) transfers serve as a way to relocate crude. This has already been used to transfer Sokol crude from Sakhalin at Nakhodka Bay, near Russia's Far East.In one key deal, the Very Large Crude Carrier (VLCC) Daban loaded two million barrels of Sokol crude on three smaller tankers in early February. Previously employed for hauling Iranian oil to China, this ship was last spotted sailing for Yantai.
Ingen from Shandong, Tokaj from Eastern, Janus from Zhoushan in east China, newly emerged terminals have revitalized the cost of off-loading these shipments. However, a key terminal operated by Wintime Energy at Huizhou port has temporarily stopped receiving crude shipments that are under sanction. Wintime Energy has not responded to inquiries, and the reason behind this decision is not clear.
In addition to the impact of shipping logistics, a reduction in Russian refinery output caused by Ukrainian drone attacks has also caused an uptick in crude exports, said Richard Bronze, head of geopolitics at Energy Aspects. In addition, Urals crude shipments to Turkey and other locations have declined after the sanctions, and more Urals cargoes have been diverted to China.
Iranian Oil Shipments Rebound
China’s purchases of Iranian oil have also surged. In January, Iran’s oil shipments to China fell to a two-year low of under 800,000 bpd, but bounced back between February 1 and 20 to 1.4 million bpd, according to Vortexa data. Of these, the shipments to Shandong province were over 1.1 million bpd, higher than the 2024 average.Kpler data also points to an increase, with Iranian crude deliveries to China hitting 771,000 bpd in February compared with 692,000 bpd in January. The difference between the two figures stems from differences in the methodologies employed to track shipments, particularly those involving the so-called shadow fleet.
Since the end of January at least eight of these newly classified VLCCs — either newly added to the dark fleet or dormant since the start of 2024 — have been sent on ship-to-ship transferral missions from Malaysia to China, according to Vortexa’s Li.
Despite this bounce, future exports of Iranian oil to China could be under renewed pressure. Analysts say tighter US action, led by former President Donald Trump, could cause delays in Iranian exports. Over the long term, this could also push Iran to reduce production.
