China, the world’s biggest buyer of oil, is at risk of losing access to cheap Iranian crude, which accounts for about 13% of its imports. This could happen if President Donald Trump enforces stricter sanctions on Tehran after his expected return to the U.S. presidency in January.
During his first term, Trump reinstated sanctions on Iran in 2018, leading to a halt in its oil exports to several countries. China’s independent refineries, known as teapots, stepped in as buyers of discounted Iranian oil in late 2019, saving billions of dollars and solidifying China’s position as Iran’s top oil market.
However, the enforcement of stricter sanctions by Trump in his second term could raise oil prices and put pressure on China’s refining sector, which is already struggling with weak fuel demand and tight margins. This could particularly impact teapots, some of which are already operating at a loss.
Despite tighter sanctions, China’s imports from Iran have increased by about 30% between January and October. However, further sanctions could tighten supplies and worsen margins for independent refiners.
It is important to monitor the situation as stricter sanctions could have significant implications for the global oil market and potentially affect oil prices worldwide.