BEIJING: China's crude oil imports from Iran rose to their highest in nearly a year in June despite tough Western sanctions targeting Iran's oil shipments. 

 

China bought more crude from Iran in June than it did on average last year before sanctions against the Persian Gulf nation imposed by the European Union that went into force July 1.

 

Iranian oil shipments rose 17 percent from May to 2.6 million metric tons, or about 635,000 barrels a day, according to Bloomberg calculations from data e-mailed by the Beijing- based General Administration of Customs . China bought 2.3 million tons of crude from Iran on average each month, or about 557,000 barrels each day, last year.

 

China, the Islamic nation’s biggest crude customer, calls its purchases “completely justified and legitimate.” 

“Many Chinese refineries are designed to process only Iranian crudes and not other grades,” Gordon Kwan, the Hong Kong-based head of regional energy research at Mirae Asset Securities, said by e-mail . “Even if China wants to follow the EU sanctions, it will take at least three to six months or early 2013 before we see any meaningful reductions.”

 

Iran’s share of China’s overseas purchases rose for a fourth month, according to Bloomberg calculations based on the customs data. Crude from the country accounted for 12 percent of total imports in June, up from 9 percent in May and the highest since October.

Supply Interruption

 

China won a 180-day exemption from U.S. financial sanctions for having significantly reduced its Iranian purchases, Secretary of State Hillary Clinton said June 28.

 

Under the U.S. law enacted Dec. 31, financial institutions in nations that don’t win exemptions may be cut off from the U.S. system if they settle oil trades with Iran’s central bank. The EU sanctions that went into effect July 1 include a ban on insurance for ships carrying Iranian cargoes that affects 95 percent of the world’s tankers.

 

“China is also worried about a potential oil supply interruption in the Persian Gulf later on this year if war erupts in the region,” Kwan said. “China is taking advantage of the recent oil price decline in June to stockpile more strategic reserves,” he said.

Choke Point

 

Iran warned it can strike any target in the Strait of Hormuz and the Persian Gulf and will soon equip ships with missiles capable of firing more than 300 kilometers (186 miles), the state-run Mehr news agency reported June 29, citing a commander of the Islamic Revolutionary Guards Corps. Tankers carrying about a fifth of globally traded oil exit the Persian Gulf though the Hormuz choke point.

 

Iran was China’s third-biggest crude supplier last month, after Saudi Arabia and Angola. Saudi shipments totaled 4.91 million tons, while those from Angola were 3.76 million, according to customs data. Russia was fourth at 2 million.

 

Iranian cargoes cost $108.10 a barrel on average in June, compared with Saudi supplies at $109.74. Angolan shipments cost $115.06, Russian crude $112.66 and Kazakh deliveries $112.28, the Chinese customs data show.
 

(Source: Bloomberg)