Discounts on Iranian crude sold to China have widened to their steepest levels in over a year as tougher Western sanctions on Iran and Russia disrupt logistics and discourage independent refiners already struggling with limited import quotas, Reuters reported on Wednesday.
According to trade sources who declined to be named due to commercial sensitivities, offers for Iranian light crude have dropped to more than $8 a barrel below benchmark ICE Brent for December delivery, compared with about $6 in September and $3 in March.
Bids have fallen even lower -- to discounts near $10 per barrel -- as buyers seek to offset sanctions risks and possible delays at Chinese ports.
The slide follows a fresh wave of US, UK and EU sanctions targeting Russian and Iranian energy networks, including several Chinese refiners, ports, and shipping firms accused of moving sanctioned oil.
The measures have compounded uncertainty for Chinese “teapot” refiners, many of whom have run out of crude import quotas for 2025, reducing purchases ahead of expected new allocations in November.
Oversupply and sanctions overlap
The new Western sanctions have also hit Russian producers, prompting some Chinese and Indian buyers to pause purchases and pushing additional Russian barrels into the spot market, further weakening prices for Iranian grades.
The overlap has created what traders described as a “buyers’ standoff” with sellers unable to move cargoes quickly.
"There was just too much supply, and the market is directionless," a China-based trader told Reuters.
Iranian crude exports -- around 14% of China’s total imports -- fell to 1.2 million barrels per day in September, down from an average of 1.38 million bpd this year, according to data from analytics firm Kpler.
Beijing’s independent refiners have turned into Iran’s lifeline buyers, often processing oil delivered via a network of ship-to-ship transfers and rebranded cargoes that obscure origin and ownership.
A Reuters investigation this week traced parts of this “shadow fleet” to a New Zealand insurer, Maritime Mutual, accused of covering vessels carrying Iranian and Russian crude under false identities.
The report said the insurer’s clients had moved at least $18 billion worth of Iranian oil since 2018, highlighting how Tehran has maintained exports despite sanctions.
Tehran defies restrictions
Iran’s oil ministry continues to reject Western restrictions as “illegal,” vowing to sustain exports to China and other Asian markets.
Nearly 90% of Iranian oil shipments are now believed to go to China, much of it through ship-to-ship transfers and offshore storage, according to Western and industry estimates.
Earlier this month, the US Treasury imposed sanctions on more than 50 individuals, entities and vessels tied to Iran’s petroleum and gas trade, marking the fourth round of such measures under President Donald Trump targeting Chinese refiners still buying Iranian crude.
With official trade channels shrinking, Tehran has also been reported to accept Chinese weapons and infrastructure projects as payment in barter-style arrangements designed to sidestep banking restrictions.
