Iranian oil slips into discount amid weak Chinese demand and US blockade

Iranian oil prices have fallen into discount for the first time since April, as weak demand from Chinese refiners outweighs tighter supply caused by a sharp drop in exports under the US blockade, Reuters reported on Friday.

Iranian Light crude is being offered at a discount of 50 cents to $1 per barrel against ICE Brent for delivery this month to China’s eastern Shandong province, three traders told Reuters. The grade had traded at premiums of $1 to $2 in the previous two months.

Shandong is home to China’s independent refiners, known as teapots, which are among the main buyers of sanctioned Iranian oil. But weak fuel demand and poor refining margins have forced some of them to cut processing rates.

“Buyers aren’t accelerating procurement even if supply is tight, because prices are still too high for teapots who are suffering great losses,” said Xu Muyu, senior crude oil analyst at Kpler. “Also teapots are lowering run rates, so demand is also coming down.”