Chart of the Week: China’s Iranian oil imports nearly halve since war

China, the world's largest crude importer, has seen a nearly halving of its Iranian oil imports since the conflict erupted. In 2023, China imported approximately 12.4 million barrels per day (bpd) of crude, with about half of that coming from Iran. Beijing has been Iran's primary buyer of sanctioned oil, accounting for 90% of Iran's exports.

However, the ongoing war has significantly disrupted the flow of Iranian crude through the Strait of Hormuz and the Bab Al Mandeb chokepoints. In July and August 2024, Chinese imports of Iranian crude through the Strait of Hormuz averaged 530,000 bpd, a 48% decrease from pre-war levels and a 72% drop from the October 2024 peak of 1.9 million bpd.

This has had a substantial impact on China's smaller independent "teapot" refiners, who have less supply diversity than state-owned oil majors and rely on cheap Iranian oil to maintain healthy refining margins. For much of the war, China was still able to import oil unhindered due to its friendly relations with Iran. However, the Strait of Hormuz has become increasingly challenging to navigate because of Iranian and U.S. blockades.

As a result, China has sought alternative routes, such as the Red Sea and the Suez Canal, but these workarounds have proven costly and have significantly increased voyage times to Asia. The latest US sanctions may further pressure Beijing, as Washington warns that countries dealing with Iran could face secondary sanctions. Despite this, China maintains a substantial buffer of oil inventories, ranging from 1 billion to 1.4 billion barrels, allowing it time to absorb delays and face higher shipping costs.