- Chinese independent refiners have bought more than 20 million barrels of crude from West Africa, Canada and South America as Iranian and Russian supplies tighten.
- Strong demand has pushed some crude premiums to multi-month highs, with Congolese Djeno trading at about $22 per barrel above ICE Brent.
Chinese independent refiners are scrambling to secure crude oil from West Africa, Canada and South America as supply disruptions reduce access to Iranian and Russian oil. The buying spree has lifted spot premiums to multi-month highs and added pressure to global physical oil markets.
Trade sources and analysts said Chinese independent refiners, commonly known as teapots, purchased more than 20 million barrels of crude from alternative suppliers in recent weeks. Their buying activity comes as escalating US-Iran attacks disrupt Gulf exports through the Strait of Hormuz and push Brent crude above $100 per barrel.
Supply Disruptions Intensify Competition
China’s smaller independent refiners account for about one-fifth of the country’s crude imports. They have traditionally relied on discounted supplies from producers facing international sanctions.
However, a US naval blockade on Iran has restricted Iranian exports. Meanwhile, major Chinese refiners Sinopec and Yulong Petrochemical have bought much of the Russian ESPO Blend crude shipped from Kozmino in Russia’s Far East.
These constraints have forced teapots to compete for available spot-market cargoes. Nearly 10 independent refineries sent traders to an annual industry gathering in Singapore to secure supplies and negotiate deals.
A senior trader described the refinery representatives’ approach as “less leisurely and more work-focused as they’re short of oil.”
West African Crude Commands Higher Premiums
Recent deals include at least two cargoes of Congolese Djeno crude and one cargo of Angolan Plutonio crude. Global trading firm Trafigura and energy company TotalEnergies supplied some of the cargoes, according to trade sources.
Djeno, a heavy sweet crude grade, traded at premiums of about $22 per barrel above ICE Brent for November delivery. One trader attributed part of the premium to elevated freight rates. The grade traded at a discount in June.
Chinese refiners have also purchased at least four Aframax-sized cargoes of heavy Canadian crude shipped through the Trans Mountain pipeline. One deal closed at $3.70 per barrel above ICE Brent for October-to-November delivery.
Some independent refiners are also negotiating purchases of small volumes of domestic crude from Xinjiang for delivery later in October or in November.
Trafigura declined to comment on the reported transactions, while TotalEnergies had not immediately responded to a request for comment.
Russian ESPO Supplies Remain Tight
Russian ESPO Blend remains one of the few reliable alternatives because it offers relatively short shipping routes to China. Traders said the grade last traded at a premium of $12 per barrel above ICE Brent for November delivery.
December premiums could rise further as attacks on tankers in the Gulf tighten Middle Eastern supply. This outlook increases competition for Russian crude and alternative grades from other producing regions.
Chinese independent refiners are also expected to increase processing rates to meet fuel demand. State-owned refiners are replenishing domestic inventories to levels required by the central government, a condition for maintaining high levels of profitable fuel exports.
The need to use import quotas before the end of the year is adding further pressure to crude demand.
Chinese Imports Could Recover
Muyu Xu, senior crude analyst at Kpler, expects active spot purchases to lift China’s seaborne crude imports to between 8.5 million and 9 million barrels per day.
That would represent an increase from approximately 7 million barrels per day in July. However, imports would remain below the pre-war level of around 10 million barrels per day.
The latest buying spree highlights how supply disruptions are redirecting Chinese demand toward African and Canadian producers. Continued competition for available cargoes could sustain high spot premiums if Iranian, Russian and Middle Eastern supplies remain constrained.