Chinese independent refineries are sharply reducing imports of Iranian crude due to exhausted annual import quotas and weakening demand, according to analysts, refinery and trade sources.

Imports by these refineries, predominantly based in eastern Shandong province, are projected to fall to around 1 million b/d in September, according to a Shandong-based analyst and a Qingdao-based trade source, both of whom spoke on condition of anonymity due to the sensitivity surrounding Iranian oil trading under international sanctions.

This would represent a 46% decline from the 1.86 million b/d imported in August, according to data from Platts, part of S&P Global Commodity Insights.

In September, only about 2.47 million mt (equivalent to about 600,000 b/d) of Iranian crude had been discharged for independent refiners, a significant drop from the average intake over the first eight months of the year, according to S&P Global Commodities at Sea data and shipping fixtures.

From January to August 2025, these refineries imported an average of 1.37 million b/d of Iranian crude, a 19% increase from the same period in 2024, Platts data showed. The sudden contraction highlights the acute impact of quota exhaustion.

Iranian crude cargoes shipped to China are frequently observed in ship-to-ship transfers off Southeast Asia and are widely believed to make up the bulk of the Malaysian-origin or Indonesian crude registered in China’s official imports data, multiple trade sources told Platts.

China’s official customs data does not list any crude imports as originating in Iran.

A spokesperson from Iran’s state oil company NIOC declined to comment on Iranian oil exports to China, saying all oil sales data is confidential. Iranian officials have repeatedly cited geopolitical sensitivities around Western sanctions for not discussing the country’s oil flows.

Prices soften

The weakening appetite for Iran’s crude has pressured prices in recent weeks, according to local refining sources.

Iranian Light crude was offered at a discount of about $6-$6.50/b against ICE Brent Futures on a DES Shandong basis, down at least 50 cents from early September, according to Shandong-based independent refinery sources.

Similarly, Iranian Heavy traded at a discount of about $8-$8.50/b on the same basis, the sources added.

Market sources confirmed that trading activity is thin, with hardly any new deals being concluded.

“Supply is relatively sufficient, but only a handful of refineries still have available quotas to make purchases. It’s easy to push down the price when there are few real buyers,” a Qingdao-based crude trader said, speaking anonymously due to the ongoing international scrutiny of Iranian oil shipments.

Venezuelan crude

The pricing pressure extends beyond Iranian crude to other grades popular with independent refiners.

The price of Venezuelan Merey crude has also softened, with offers hovering at a discount of $7.50-$8/b to ICE Brent on a DES Shandong basis, down from levels in late August, according to another trader in Qingdao.

A Zibo-based independent refinery source indicated that some October-delivery cargoes remain unsold even as November trading should have begun, signaling persistently weak demand.

While the market might see slight support in October after Chevron resumed licenses and diverted some cargoes to the US, overall price pressure is expected to persist amid weak demand, the Zibo-based refinery source said.

Quota exhaustion

The decline is primarily due to the exhaustion of import quotas, which are mandatory for bringing crude into China, according to market sources.

Many refineries had allocated their annual quotas for an 11-month operational cycle, anticipating receiving additional quotas at the start of the year to cover December demand, they added.

However, as Platts has previously reported, the likelihood of receiving these extra quotas is now slim.

Consequently, most independent refiners will likely face at least one month of feedstock shortage. This will likely force them to cut throughput, seek alternative feedstocks like fuel oil or domestic crude, or temporarily scale back operations, according to Shandong-based independent refineries.

Source: Platts