A potential US-Iran nuclear deal that lifts sanctions on Tehran's oil industry could deal a serious blow to China's independent "teapot" refineries, which have profited from processing heavily discounted Iranian crude, Reuters analyst Ron Bousso wrote on Monday.
These small, privately owned refiners—mainly based in Shandong province—accounted for 77% of Iran’s oil exports in 2024, according to data from ship-tracking firm Kpler. Their business model has depended on sanctioned oil shipped via a shadow network of tankers and shell companies.
“If sanctions are loosened, this oil would be sold swiftly,” Bousso noted, warning that market liberalization could both depress global oil prices and undermine the fragile profit margins of teapots, which already operate at low utilization rates due to overcapacity and export restrictions.
Iranian oil production averaged 3.3 million barrels per day (bpd) last year and could ramp up by another 500,000 bpd within six months of a deal, Bousso said, citing OPEC figures. Such a surge would likely intensify Saudi Arabia’s ongoing price war while boosting Iran’s revenues and global oil supply.
The biggest losers, however, would be Chinese teapots, many of which may be forced to scale back or shut down altogether. “The removal of US sanctions on Iranian crude could therefore undermine their business models,” Bousso wrote.
In contrast, China’s large state-owned refiners stand to benefit by absorbing more market share, while the global refining industry may see a modest boost amid mounting uncertainty around fuel demand and energy transition policies.
