China switches to Iranian carriers to secure oil flow

State-run oil trader Zhuhai Zhenrong and the largest Asian refiner Sinopec Group have invoked a clause in its long-term delivery agreements with National Iranian Oil Corp (NIOC) that allows them to use NITC-operated carriers, Thomson Reuters reported on Monday, citing four sources informed with the matter.

Moreover, the price for the oil shipments under the long-term agreements has been changed into ex-ship terms, which signifies that Iran would provide for all the costs and risks for deliveries and handle insurances, which comprise cover for oil shipments, third-party liability and pollution, the sources said.

“The shift started very recently, and it was almost a simultaneous call from both sides,” one of the sources, a senior oil executive in Beijing told the news agency.

Moreover, term purchasers of Iranian oil earlier this month submitted their plans to NIOC on the crude amount to be lifted in September, two trade sources said.

Last July, all 17 vessels chartered to deliver oil from Iran to China were operated by NITC, compared to June when eight of the 19 tankers were run by Chinese operator, according to shipping data on Thomson Reuters Eikon.

Those tankers loaded around 23.8 million barrels of crude and condensate oil for China, or 767,000 barrels per day (bpd), while in the previous month 19.8 million barrels or 660,000 bpd were loaded.

Amid the re-instatement of economic sanctions against Tehran by the US which pushes for shutting down Iran’s crude exports, the largest Iranian oil importer seemingly looks to keep its purchases from the sanctioned country.

Iran utilised a similar system between 2012 and 2016 to evade Western sanctions that hampered exports because of the absence of insurance for cargos.

By 1:02 pm GMT, US Nymex futures climbed 1.57% to $67.47 per barrel (pb), while global Brent crude futures rose 0.65% to $72.68 pb.