The challenge has intensified for the VLCC Star Forest to conceal the rare Iranian barrels loaded from storage in China for Chinese buyers, market sources with knowledge of the matter said Feb. 7.
The US Treasury Department on Feb. 6 added the Hong Kong-flagged VLCC to the Office of Foreign Assets Control sanctions list, along with the Panama-flagged Gioiosa and the Panama-flagged Ch Billion.
The Star Forest was in Malaysian waters Feb. 7, setting the destination for order after it was loaded 1.98 million barrels of Iranian crude from Dalian port in northeast China, according S&P Global Commodities at Sea.
Market observers and analysts expected it would transfer the cargo ship-to-ship in order to gain a Malaysian origin certificate for selling back the barrels to China amid the US sanctions on Iranian crudes.
China has officially suspended oil imports from Iran since January 2022, according to Chinese customs data. The imports of Iranian crude into China come with Malaysia-origin certificates since then, market sources said.
“Star Forest now is in the spotlight, as it is sanctioned now, and it is from Dalian, heightening the risk. I am sure it will attract higher handling fees and spend longer time for the transitions, while the sales revenue is more likely to be too thin to cover all the costs,” said a trading source on Feb. 7.
The previous sanctions coupled with the Shandong Port Group’s decision to blacklist sanctioned vessels have caused China’s Iranian crude imports, nearly all by the independent refineries, to slump to a 12-month low of 851,000 b/d in January from 1.48 million b/d in December, S&P Global Commodity Insights data showed.
Barrels load from Dalian
A storage source told Commodity Insights that the Iranian barrels loaded from Dalian could attract about $42/b of storage fees in six years, given the market rental for a barrel was $7/year currently.
Iranian Light was offered at a discount of around 80 cents-$1/b against the ICE Brent Futures on a DES Shandong basis, which is equivalent to about Yuan 3,980/mt ($74.5/b). Iranian Heavy barrels were at a discount of $3-4/b on the same basis, sources said.
State-owned National Iranian Oil Company leased almost 20 million-40 million barrels of storage capacity in Dalian before the US secondary sanctions kicked in November 2018. Since early September of the year, almost 20 million barrels or roughly 400,000 b/d of Iranian crude and condensates have been destined for Dalian, Commodity Insights reported.
The Iranian barrels were stuck in the storage in Dalian until early January when media reported that Iran pushed to recoup 25 million barrels of oil from China.
These barrels have suddenly drawn attention due to the expensive maneuver, which may suggest that the relationship between China and Iran has become less close, market analysts said.
The VLCC Madestar, which is also in Malaysian waters for order, loaded 1.95 million barrels of Iranian crude from Dalian on Jan. 2, according to CAS. The Panama-flagged is not on the US sanctions list.
Declaration challenge
A logistics source familiar with Chinese customs operations said Iranian barrels loaded from Dalian are unlikely to be permitted for direct discharge at Chinese ports due to US sanctions.
“Crude outflows from Chinese tankers will be declared based on their initial origin. Only those blended with at least 50% of domestically produced Chinese crude can be classified as China-origin,” the logistics source said.
He further noted that nearly every barrel of domestically produced crude that is eligible for export comes from state-owned oil giants or their operational partners, who are unlikely to engage in blending with any sanctioned crude.
“This is also why almost the Iranian barrels from Dalian go to Malaysia,” he added.
The newly sanctioned Aframax Ch Billion was loaded with about 700,000 barrels of Iranian crude from Dalian on Jan. 10 and headed to Yeosu, South Korea, before discharging at Dongying port in Shandong province on Jan. 25, according to a trading source and some shiptracking companies.
CAS showed Ch Billion was loaded from Yeosu on Jan. 16 with an uncertain grade instead, which were discharged in Dongying.
Source: Platts
