China’s oil imports from Russia’s Far East and Iran are expected to recover in March, as non-sanctioned tankers increasingly replace vessels affected by U.S. embargoes, according to trade sources and analysts. This rebound is alleviating global supply concerns that had previously contributed to rising oil prices.
The United States has imposed multiple rounds of sanctions on entities and ships involved in trading Iranian and Russian oil since October, disrupting supplies to key importers like China and India. A January 10 sanctions package targeted over 140 oil tankers, affecting roughly 42% of Russia’s total seaborne crude exports and leading to a sharp increase in freight rates.
The surge in tanker rates to transport ESPO crude from Russia’s Kozmino port to China, a journey that typically lasts about a week, has attracted at least 17 non-sanctioned tankers between January 11 and February 20. These vessels were either redirected from other sanctioned routes, particularly in the Baltics, or previously carried oil products, explained Emma Li, an analyst at Vortexa.
Non-U.S. sanctioned tankers, such as the Serena and Naxos, have also joined the Russia-China trade route, after previously delivering Russian oil to India. A China-based trader, who requested anonymity due to the sensitivity of the matter, noted that the soaring freight rates have incentivized shipowners to acquire more vessels to profit from the oil trade.
Currently, tanker rates from Russia’s Far East to northern China hover around $4 million to $4.5 million, traders report. Li further noted that February’s ESPO crude loadings have risen to an average of 920,000 barrels per day (bpd), aligning with 2024’s typical levels, up from 860,000 bpd in January. This increase follows a dip in February’s ESPO deliveries to China, which were projected to fall to 780,000 bpd, marking the lowest Russian crude arrivals since December 2022.
Additionally, ship-to-ship (STS) transfers of Sokol crude have emerged at Nakhodka Bay, near Russia’s Far East port, with Very Large Crude Carrier (VLCC) Daban loading approximately 2 million barrels from three smaller tankers in early February. Daban, which had previously been used for delivering Iranian oil to China, is now en route to Yantai.
Some of China’s newer oil terminals, including those at Dongying in Shandong and Zhoushan in eastern China, have stepped in to facilitate the discharge of sanctioned oil, although one terminal in Huizhou, controlled by Wintime Energy, has temporarily halted receiving these vessels.
The ongoing geopolitical situation, including disruptions to Russian crude production from Ukrainian drone strikes, is also contributing to the increase in Russian oil exports. Richard Bronze, Head of Geopolitics at Energy Aspects, indicated that reduced Russian refinery runs have made more crude available for export, while a slowdown in exports to Turkey and other regions post-sanctions has boosted Urals cargoes to China.
Iran’s oil shipments to China have also seen a significant improvement. Imports from Iran surged to 1.4 million bpd between February 1 and 20, recovering from a near two-year low of less than 800,000 bpd in January. Iranian volumes heading to Shandong surpassed 1.1 million bpd, exceeding the 2024 average.
Despite these positive trends, analysts warn that increased pressure from the U.S. could limit Iranian oil exports to China, potentially reducing production levels over the coming months.