Since late last year, imports of Iranian crude have increasingly flowed into Dalian, a key port and refining city in China, as the country sustains its oil purchases at near-record levels. This transition comes as demand from smaller buyers in Shandong province has declined due to deteriorating refining margins caused by higher crude prices and weaker-than-expected fuel demand.
Despite U.S. sanctions reinstated in 2018 over Iran’s nuclear program, China has continued to purchase Iranian oil, with independent refineries stepping in to fill the gap left by state firms hesitant to engage with sanctioned oil. According to Vortexa, a consultancy tracking tanker flows, 23 cargoes totaling 45 million barrels of Iranian oil were discharged at Dalian between October 2023 and June 2024, including 28 million barrels at Changxing Island.
Kpler, another consultancy, estimated that China imported 34 million barrels into Dalian during the same timeframe. This equates to approximately 124,000-164,000 barrels per day, roughly 13% of China’s total Iranian oil imports in the first half of 2024. Analysts estimate that China imported 1.2-1.4 million barrels per day of Iranian crude during this period, with a record of 1.52 million barrels per day reached last October.
When questioned about the Dalian imports, China’s foreign ministry stated that trade between China and Iran is maintained within the international legal framework, asserting opposition to unilateral sanctions. However, traders often rebrand Iranian oil destined for China as coming from other countries, such as Malaysia or the UAE.
Dalian shipments are directed to several key facilities, including Hengli Petrochemical’s 400,000-barrel-per-day refinery complex and storage farms operated by PetroChina and the Liaoning Port Authority. Although there is no pipeline connecting the storage facilities to external refineries, sources indicate that Hengli has been a buyer of Iranian crude, with estimates suggesting purchases of 4-6 million barrels per month early in 2024.
Despite Hengli’s involvement, a spokesperson denied purchasing Iranian oil. PetroChina has not engaged in Iranian oil purchases since 2018/2019, and requests for comments from the Liaoning Port Group went unanswered.
Before October 2023, Dalian had received only sporadic shipments of Iranian oil, but the recent influx is attributed to the oil’s attractiveness due to steep discounts compared to similar Middle Eastern grades.