US Blockade Pushes Iranian Oil Prices Higher In China

Iranian crude offers to Chinese buyers have risen from their traditional discounts as the U.S. blockade of Iranian shipping since July 13 has reduced available cargoes and increased supply uncertainty, according to shipping data reviewed by Reuters.

Floating Iranian crude storage fell to about 80 million barrels from 105 million barrels after the blockade was reinstated, while China’s imports of Iranian crude declined to about 534,000 barrels per day from a 2025 peak of 1.4 million barrels per day, Reuters reported.

Chinese Refiners Face Higher Iranian Crude Costs

The supply squeeze is particularly significant for China’s independent “teapot” refiners, which have been major buyers of Iranian crude. The U.S. Treasury said in April that China purchased about 90% of Iran’s oil exports, with independent Chinese refineries accounting for most of those purchases.

Reuters reported that Iranian crude available for September and October delivery has become increasingly scarce, prompting Chinese refiners to seek alternative supplies including Brazilian and Iraqi crude. Iranian barrels that traditionally traded at a discount have moved to premiums as availability has tightened.

US Sanctions Put Chinese Refiners Under Greater Pressure

The U.S. Treasury has already targeted Chinese refiners involved in Iranian oil purchases. In April, the Office of Foreign Assets Control sanctioned Hengli Petrochemical (Dalian) Refinery Co. Ltd., saying the refinery had purchased billions of dollars of Iranian petroleum and received more than 5 million barrels through several sanctioned vessels since at least 2023.

The Treasury also said in April that Chinese independent refineries known as “teapots” play a major role in Iran’s oil trade. Its guidance warned financial institutions about sanctions exposure associated with Chinese refineries importing Iranian crude.

China’s Commerce Ministry subsequently issued a blocking order in May covering U.S. sanctions imposed on five Chinese companies over Iranian oil transactions, including Hengli Petrochemical. The ministry said the U.S. measures constituted improper extraterritorial application of American law and prohibited compliance with those sanctions inside China.

Hormuz Disruption Raises the Cost of Replacement Barrels

The disruption extends beyond Iranian crude because shipping through the Strait of Hormuz remains severely reduced. Reuters reported that only six commodity vessels passed through the strait on Aug. 18, compared with nine the previous day and a recent average of 11 daily transits.

The reduced traffic has also affected Chinese oil logistics. Reuters reported that two major Chinese shipping companies that previously carried about half of China’s Middle Eastern oil imports stopped operating through the Strait of Hormuz and Bab al-Mandab from late July.

The broader supply impact is visible in China’s refining data. China’s National Bureau of Statistics reported that July refinery throughput was 53.11 million metric tons, equivalent to about 12.5 million barrels per day and 15.8% below July 2025. Reuters also reported that Chinese crude imports were down 24% year over year in July.

What It Means for China and Global Oil Markets

China has some capacity to cushion the disruption through inventories and alternative supplies. Reuters estimated that China’s crude stockpiles exceeded 1.2 billion barrels and reported that the country added about 210,000 barrels per day to inventories in July despite lower imports.

Alternative Middle Eastern supplies are also available, but transportation through Hormuz remains a constraint. S&P Global reported in early August that Chinese independent refiners had resumed buying Iranian crude in late July when September cargoes were offered at discounts of $4-$5 a barrel to Brent, illustrating how quickly pricing conditions can change as physical availability shifts.

For Chinese refiners, the immediate adjustment is therefore a combination of higher Iranian crude prices, reduced Iranian volumes and greater reliance on alternative grades. For the wider market, restoring stable shipping through Hormuz would provide the clearest route toward normalizing crude flows and reducing the supply premium embedded in prices. Reuters reported Brent at about $93.61 a barrel on Aug. 21, up 5.8% for the week.