Iranian oil has slipped to a discount in China for the first time since April as independent refiners pulled back amid sluggish demand, traders cited by Reuters told Ada Derana, even as a US blockade keeps Iran’s exports near multi-year lows.
Iranian Light crude cargoes are being offered at a discount of 50 cents to $1 a barrel against ICE Brent for delivery to Shandong this month, three traders said — a sharp reversal from premiums of $1 to $2 over the previous two months. Shandong is home to the independent refiners known as teapots that are the main consumers of sanctioned oil.
Russian ESPO, another grade favoured by the teapots, has weakened in tandem: premiums for June delivery have eased to about $3 to $4 a barrel over ICE Brent from $4 to $5 last month, two of the traders said.
“Buyers aren’t accelerating procurement even if supply is tight, because prices are still too high for teapots who are suffering great losses,” Kpler senior crude oil analyst Xu Muyu said. “Also teapots are lowering run rates, so demand is also coming down.” Some teapots cut runs in May on mounting losses and weak fuel demand.
China’s Iranian crude imports fell to 1.10 million barrels per day in May, the lowest since January 2025, while Russian crude imports dropped to 1.04 million bpd, the lowest since August, Kpler data showed.
The pullback in prices comes despite a collapse in Iran’s exports and shrinking stockpiles overseas. Iran’s crude exports hit a six-year low of 260,000 bpd in May on Kpler data, less than a fifth of the 2025 average of 1.67 million bpd; OilX put May exports at 350,000 bpd against a 2025 average of 1.7 million bpd. Iranian oil on water outside the blockade zone has dropped to about 79 million barrels from around 130 million in mid-April, when the US blockade of Iranian ports began.
The signal matters for Sri Lanka because softer crude on the world’s largest Iranian crude market caps the upside on benchmark prices despite the supply squeeze — a more favourable backdrop for the Ceylon Petroleum Corporation’s monthly fuel bill, which hit US$886 million in April and is now back near pre-war levels at US$198 million by July. Colombo has also held direct talks with Tehran on prospective Iranian oil supply during the crisis cycle.
