In a surprising shift, Chinese independent refiners are now turning to discounted Iranian heavy crude oil as a replacement for Venezuelan shipments that have faced significant disruptions. This change comes after the U.S. government asserted control over Venezuelan oil exports in January 2026, leading to a drastic decrease in crude supplies from that country, according to two knowledgeable sources who spoke on the condition of anonymity due to the sensitive nature of the topic.
As the world's largest importer of crude oil, China's need for reliable supplies is critical, and refiners are increasingly relying on Iranian oil stocks stored both in tanks and on ships. The ongoing drawdown of Iranian reserves is effectively compensating for the shortfall in Venezuelan crude, which has historically been a major source for these refiners.
Since mid-December 2025, Venezuelan oil shipments to China have plummeted sharply. This drop coincided with new sanctions imposed by former U.S. President Donald Trump, targeting vessels associated with Venezuelan oil exports as part of a larger strategy against President Nicolas Maduro’s regime. Recent reports indicate that the U.S. has plans to maintain control over Venezuela’s oil revenues indefinitely following Maduro's capture by U.S. forces on January 3, 2026.
In a bid to manage the situation, Washington has designated global trading companies like Vitol and Trafigura to orchestrate the sale of up to 50 million barrels of Venezuelan oil. This has resulted in state-owned PetroChina hesitating to make purchases while it evaluates the implications of these U.S.-controlled sales.
The independent refiners, colloquially known as "teapots" and primarily located in eastern Shandong province, are now focusing on acquiring Iranian heavy crude and other grades, such as Pars crude, which offers them substantial discounts compared to their Venezuelan counterparts. Traders have noted that these refiners are prioritizing the cheaper Iranian options over Venezuelan oil marketed by Vitol or Trafigura, or even premium grades sourced from Canada.
Currently, the price difference is striking: Iranian Heavy crude is reportedly selling for about $12 per barrel less than the ICE Brent benchmark, making it an appealing choice for these refiners. In contrast, Russian Urals crude, another potential alternative, is offered at a discount of around $11 to $12 per barrel below ICE Brent for deliveries to China.
Despite receiving an offer from Vitol for Venezuelan crude at approximately $5 per barrel less than ICE Brent for April delivery, many teapots are unlikely to pursue this option due to recent increases in prices, which saw discounts previously at around $15 narrowing significantly.
Data from analytics firm Kpler indicates that China averaged imports of 394,000 barrels per day of Venezuelan crude in 2025, accounting for roughly 4% of its total seaborne crude imports. However, as the flow of oil tankers leaving Venezuela for China has dwindled, floating storage of Venezuelan crude in Asia has fallen dramatically to just 8.26 million barrels as of January 28, down from 16 million barrels at the beginning of 2026.
Conversely, Iranian oil stored on tankers in Asia also saw a decrease, dropping to 41.72 million barrels from 46.25 million barrels during the same timeframe. Meanwhile, Russian-origin crude in floating storage surged to a month-high exceeding 10 million barrels, reflecting decreased demand from markets like India and Turkey.
This evolving landscape of crude oil procurement highlights the shifting dynamics in global energy markets and raises important questions: How will these changes impact international relations? And what does this mean for the future of oil dependency in countries like China? We invite you to share your thoughts on these pressing issues.
