Chinese company Unipec to reduce purchases of Iranian oil

One of the two largest purchasers of Iranian oil in China – the company Unipec (China International United Petroleum & Chemicals Co., Ltd.), subsidiary of Sinopec – will reduce its purchases of Iranian oil this year. The other major Chinese buyer – the state-owned oil trader Zhuhai Zhenrong – will remain the same amount of purchases to 240,000 barrels per day.

It’s difficult to specify how much lower will be the volume of Unipec’s purchases. Last year, it bought 260,000 barrels of Iranian oil per day.

Market participants expect that China, by contrast, will increase purchases of oil in Iran against the backdrop of a European embargo, which may leave the Islamic republic with no foreign exchange earnings. This year’s negotiations on the supply of crude oil between the two countries was delayed, although the agreements are usually in January. Market participants believe that China is trying to capitalize the situation and force Tehran to reduce the price of oil.

Even if China will reduce imports from Iran, it still remains the largest market for Tehran. Last year, Beijing increased its purchases by 30 percent to a record 555,000 barrels a day. The Islamic Republic is the third largest supplier of oil to China by the seller after Saudi Arabia and Angola.

Iran has already faced a shortage of currency and other difficulties caused by the oil embargo by the European Union. The ban on the purchase of crude oil in the Islamic republic will come into full force on 1 July this year. Iran threatens to cut off supplies before then, without giving the EU the possibility of finding other sellers of oil. In particular, February 19, Tehran has stopped the sale of crude oil to French and British companies. A day later, according to Agence France-Presse, Iran has threatened to cut supplies to a few European countries including Spain, Italy, Greece, Portugal, Germany and Holland.