Iran’s Disappearing Oil Is Becoming Everyone’s Problem

Iranian crude supplies that once underpinned a chunk of Chinese refinery feed have eroded after a sequence of transport restrictions and the run-down of large floating inventories. China received roughly 1.4 million b/d of Iranian oil on average in 2025, and shipments rose to about 1.76 million b/d in April when Tehran’s cargoes continued to move even as other tankers were restricted in the Strait of Hormuz. That advantage ended after a US blockade announced on April 13 curtailed movements out of the Gulf and knocked Kharg Island loadings down sharply. Iran had accumulated substantial floating stocks — about 160 million barrels in mid-April — which allowed deliveries to continue for a period despite limits on fresh loadings. That buffer fell to about 106 million barrels by mid-June, was briefly replenished to 128 million by mid-July following a short-lived memorandum permitting passage, then declined again. By late September China’s arrivals had dwindled: 980,000 b/d in August, 475,000 b/d in September, and no observed Iranian loadings from September 26 onward. The remaining roughly 86 million barrels on the water is the lowest since January 2025, with about 23 million barrels trapped inside the Gulf. With onshore storage filling (Kpler data cited in the source suggests roughly 70 million barrels stored onshore, about 60% full), Iran faces narrowing options: continuing production at pre-war levels appears unlikely and Tehran may need to cut output once floating and onshore capacity are exhausted. That reduction would remove what had amounted to roughly a fifth of China’s crude imports supplied to smaller independent “teapot” refiners, which relied on discounted sanctioned grades from Iran and Russia. Those independents are already seeking substitutes farther afield. Refiners in Shandong that once depended heavily on Iranian grades have shifted toward Brazil’s Tupi and Buzios and even Guyana’s Golden Arrow, while also buying more from Saudi Arabia and Russia. Intake at key Shandong ports has fallen — Qingdao’s flows dropped to about 150,000 b/d over recent months from a 2025 reliance where Iran supplied roughly 40% of 690,000 b/d — and Dongying saw throughput fall to about 220,000 b/d in September. Longer voyages, a shortage of very large crude carriers, and record freight rates have made alternatives like Guyanese crude significantly more expensive. Meanwhile competition for Russian crude has intensified, lifting ESPO differentials to a reported $28/bbl premium to ICE Brent and pushing Urals $7–8/bbl above the same benchmark. Becoming scarcer in China, replacement barrels also tighten availability for other buyers worldwide. The combined effect of reduced Iranian exports and surging competition for alternatives is altering regional flows, raising costs for independents and state buyers alike, and narrowing spare supply that previously helped smooth global crude balances.