Chinese ‘teapots’ buy Iranian heavy crude to replace Venezuelan supply

Chinese independent refiners are turning to discounted Iranian heavy crude to replace Venezuelan shipments that have stalled following US actions against Caracas, Reuters reported, citing two people familiar with the matter.

The drawdown of Iranian oil held in storage has helped offset the drop in Venezuelan supply to China, the world’s largest crude importer, the sources said. Venezuelan shipments to China have fallen sharply since mid-December after US President Donald Trump imposed a blockade on sanctioned vessels as part of a campaign against President Nicolas Maduro, which culminated in his abduction by US forces on January 3. Trump has said Washington intends to control Venezuela’s oil sales and revenues indefinitely.

The United States has assigned global trading firms Vitol and Trafigura to sell up to 50 million barrels of Venezuelan oil. However, state-owned PetroChina has held off on purchases while assessing the US, controlled sales, the sources said.

China’s independent refiners, known as “teapots” and mostly based in Shandong province, have instead snapped up Iranian heavy crude stored in bonded tanks in China and on ships. Traders said the refiners prioritized sanctioned crude due to steep discounts, rather than Venezuelan cargoes marketed by Vitol or Trafigura, or heavy grades from Canada.

Teapot refineries seek out Iranian oil to compensate lack of Venezuelan oil
The teapots are seeking additional shipments of Iranian Heavy and Pars crude for delivery in February and March, one of the sources said, declining to be named due to the sensitivity of the matter. Iranian Heavy has been offered at discounts of around $12 per barrel to ICE Brent, making it the cheapest available substitute. Russian Urals crude was trading at discounts of $11 to $12 per barrel below Brent for March delivery into China.

By contrast, the teapots were unlikely to take up Venezuelan crude offered by Vitol at discounts of roughly $5 per barrel to ICE Brent for April delivery, traders said, citing the sharp increase in pricing from earlier levels of around $15 below Brent.

China’s imports of Venezuelan crude averaged 394,000 barrels per day in 2025, accounting for about 4% of the country’s total seaborne crude imports, according to data cited by the sources. As tanker departures from Venezuela have declined, floating storage of Venezuela-origin crude in Asia fell to 8.26 million barrels on January 28, down from 16 million barrels at the start of 2026.

Iranian oil stored on tankers in Asia also declined during the same period, falling to 41.72 million barrels from 46.25 million barrels. Meanwhile, floating storage of Russia-origin crude in Asia rose to above 10 million barrels last week, a one-month high, amid weaker demand from India and Turkey.