China’s Sinopec Corp is halving loadings of crude oil from Iran this month, as the state refiner comes under intense pressure from Washington to comply with a U.S. ban on Iranian oil from November, said people with knowledge of the matter.
The sources did not specify volumes, but based on the prevailing supply contract between the top Chinese refiner and the National Iranian Oil Company (NIOC), its loadings would be reduced to about 130,000 barrels per day (bpd).
This would be 20 percent of China’s average daily imports from Iran in 2017, dealing a blow to Tehran, which has counted its top oil client to maintain imports while European and other Asian buyers wind down purchases to avoid U.S. sanctions.
The cut marks Sinopec’s <600028.SS> deepest reduction in years as the Hong Kong and New York-listed state oil company faces direct pressure from a U.S administration determined to choke off the flow of petrodollars to the Islamic Republic.
The move comes after senior U.S. officials visited the refiner in Beijing last month, demanding steep cutbacks in Iranian oil purchases, said one of the sources.
“This round is completely different from last time. Then it was more of a consultative tone, but this time it’s almost like an ultimatum,” said the source.
The sources declined to be identified due to the sensitive nature of the matter. Sinopec declined to comment. NIOC did not respond a Reuters email seeking comment.
Further complicating the matter, Iran is having difficulty securing insurance for its oil vessels, said shipping and insurance sources, as most European and U.S.-based re-insurance firms are winding down their Iranian business.
Chinese buyers, including Sinopec and state-run trader Zhuhai Zhenrong Corp, have since July shifted their cargoes to vessels owned by National Iranian Tanker Co (NITC) to keep supplies flowing amid the reinstatement of economic sanctions by the United States. [nL3N1VB1I4]
During the last round of United Nations sanctions around 2011, officials from Washington asked Chinese firms to curb investments in Iranian oil and gas fields, but stopped short of demanding a full stop to oil shipments. (https://reut.rs/2xHEYy2)
It’s not clear if Zhuhai Zhenrong has also reduced loadings this month. The state trader is contracted to lift some 240,000 bpd from Iran, mainly to feed Sinopec refineries.
It’s also not clear if Sinopec and PetroChina <0857.HK> are cutting loadings from their upstream investment in key Iranian oilfields that total between 100,000 to 150,000 bpd. These loadings are separate from their annual supply contracts.
Beijing has repeatedly defended its energy trade with Tehran, worth about $1.5 billion a month, as transparent and lawful. Some of the top oil refineries that come under Sinopec are configured to process Iranian oil.