China imported Iranian crude at an average daily rate of 874,000 barrels last month, S&P Global Platts data shows, and, according to the agency, these will start declining now, with the August number representing the peak.

Loading data for delivery this month suggests that China imports of Iranian crude will average 581,000 bpd in September.

Despite this expected decline, China has said it will continue to do business as usual with Iran, including in oil, despite a promise that Beijing officials made to a U.S. delegation last month that Chinese refiners will not increase their intake of Iranian crude further. In light of the escalating trade war between China and the United States, it’s anyone’s guess how willing the Chinese will be to keep this particular promise.

As for how Chinese refiners would continue buying crude from Iran without attracting sanctions from the Department of Treasury, one way would be by using tankers owned and insured by the National Iranian Oil Company. Another, less public way would be to accept illegal shipments that Iran has suggested it could resort to under sanctions.

Sinopec, China’s and the world’s largest refiner, is one company that will continue buying Iranian crude despite sanctions because “The company's business will be hurt if it has to suspend imports from Iran,” S&P Global Platts quoted a Sinopec executive as saying last week. What’s more, in a filing with the U.S. Securities and Exchange Commission, Sinopec said "Since we have performance obligations under our Iran-related contracts in 2018, we are contractually required to continue our [purchases]."

Sinopec is the biggest Chinese buyer of Iranian crude, utilizing two-thirds of the total. PetroChina is another big buyer, taking in about one-tenth of total Chinese imports from Iran, and it recently boosted its capacity for refining Iranian blends. The third-largest buyer of Iranian crude in China is a trader, Zhuhai Zhenrong, which then sells it on to local refineries.

By Irina Slav for Oilprice.com

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