China’s record oil imports from Asia minnow point to Iran flows

China imported a record volume of crude from Malaysia last month, pointing to a renewed appetite for cheaper Iranian oil as refiners grapple with lower margins due to an economic slowdown.

The world’s biggest crude importer took 6.21 million tons from Malaysia in July, according to government figures released on Tuesday. That’s equivalent to 1.47 million barrels a day, or almost triple the average daily production from the Southeast Asian nation over the course of 2023.

The seas off Malaysia have long been a hub for transferring crude and oil products from one tanker to another, sometimes to mask the country of origin, including from Iran. Officially, China hasn’t purchased Iranian barrels since June 2022, according to government data.

Oil from Iran is the cheapest option for Chinese buyers, and more independent refiners — known as teapots — are seeking barrels from the OPEC producer to boost their margins, said traders who participate in the market. Iranian Light was last offered at a discount of $6 a barrel to ICE Brent, they added, compared with a discount of less than a $1 for comparable crude from Russia.

Importers registered in China’s Shandong province were the biggest buyers of Malaysian crude, accounting for over 70% of the volume, according to customs data. Overall, eight Chinese regions including Liaoning and Henan took oil from the Southeast Asian nation, the most since October 2023.