Though sanctions on Iranian oil exports have been waived as part of the ceasefire deal between Tehran and Washington, Iran could face the unexpected problem of not having any interested buyers, according to a new analysis.
China has long been the primary destination for Iranian crude, but that relationship has grown noticeably weaker. Fereidun Fesharaki, chairman emeritus at FGE NexantECA, noted on CNBC's "Squawk Box Asia" that "In fact, the Chinese do not show any enthusiasm to buy much oil from anybody."
The numbers back the claim, as China's overall crude imports have fallen sharply since the war in Iran began in late February. In May, imports dropped to their lowest level since February 2018, at 29% year-over-year to 7.82 million barrels per day, according to Wind Information. Chinese purchases of Iranian oil more than halved in June, falling to roughly 654,000 barrels a day compared with the previous month, according to Bloomberg.
Part of this shift appears structural rather than temporary. A report from the Stockholm-based Institute for Security and Development Policy suggests the Middle East conflict has "sharpened China's strategic focus and injected renewed momentum into its green transition efforts."
Chinese Premier Li Qiang appeared to back the narrative, calling for expanded non-fossil energy capacity, a new energy system, and faster reform and innovation in the sector. If China is genuinely accelerating its pivot away from fossil fuels, that could mean structurally lower long-term demand for Iranian crude, regardless of whether sanctions ease.
Beyond China's cooling demand, Iran also faces the fact that there's simply more oil competing for the same buyers. OPEC+ recently agreed to raise its output target by 188,000 barrels a day for August, continuing a broader effort to unwind production cuts implemented in prior years. Per a United Overseas Bank report cited by CNBC, "The increase is part of the group's plan to finish reversing output curbs made a few years ago, and means they've added 940,000 barrels a day to quotas since the war began."
Market analyst Tiago Lacerda of brokerage Axi told CNBC, "The supply surge is real," pointing to a substantial buildup of oil at sea. Iran itself has reportedly shipped more than 40 million barrels since the U.S. lifted its naval blockade, while Russian exports have also climbed to record levels.
With Iranian, Russian, and OPEC+ barrels all entering the market simultaneously, buyers have far more options than they did previously, reducing the urgency to specifically seek out Iranian crude even if sanctions are relaxed.
Potential disruption to shipping through the Strait of Hormuz could also upend these dynamics. Fesharaki noted that Iran has signaled that its current policy of "free" passage through the strait is temporary, lasting only 60 days, after which it plans to impose tiered tolls based on its relationship with each country, charging allies less, adversaries more, and potentially blocking some countries from passing through at all.
He described the situation as "If you are my friend, you pay less. If you are not my friend, you pay more. If I don't like you, maybe I won't even let you take your oil through."
