China holds off on new Iranian crude orders after US sanctions refinery

Executive Summary

Market & Trading calls:

Americas:

• Bullish on crude exports from Guyana as the country's fourth and largest FPSO is expected to come online over H2 and reach close to peak production capacity by late 2025.
• Bullish on WCS Hardisty differentials amid tighter US crude stocks, which eased counter-seasonally last week, recovering Canadian exports, and ongoing uncertainty around Venezuelan supply.
• Bullish on Maya prices, despite a strong uptick in exports in March, supported by uncertainty surrounding Venezuelan crude exports, structural supply constraints and potential shifts away from US markets.

Atlantic Basin:

• Bearish on light sweet crude differentials in NWE/Med amid the start-up of the Johan Castberg field and seasonal refinery maintenance in the region.
• Bullish on the volumes of medium sweet Nigerian grades being exported to European refineries in Q2 2025.
• Bullish on a continued narrow Brent-Dubai EFS spread in the medium-term due to a rise in Atlantic Basin production, persistent economic uncertainty across the West-of-Suez, and muted global demand growth.

Middle East and Asia:

• Bearish on Iranian crude prices as Chinese teapots hold off on new orders following Washington's first sanctions on a Chinese refinery.
• Bullish on Syria’s crude imports with the country receiving its first cargoes since the fall of the Assad regime.
• Bearish on India’s demand for Middle Eastern crude as ample supply and competitive pricing of Russia’s Urals could reduce the need for spot tenders of other grades.

Americas: Guyana supply set to surge in late 2025 as Yellowtail nears startup

ExxonMobil’s 250 kbd Yellowtail project—the fourth and largest development in Guyana’s Stabroek Block—made key progress in February with the One Guyana FPSO departing Singapore en route to the offshore field. The unit was last seen approaching the Indian Ocean and is expected to arrive by Q3. First oil is targeted for the second half of 2025, according to Guyana’s Natural Resources Minister—a timeline we view as realistic given ExxonMobil’s consistent track record of bringing previous projects online on schedule.

We estimate Yellowtail will produce 180 kbd by year-end, ramping up to its full 250 kbd capacity by late Q1 2026. That would lift Guyana’s total crude and condensate output from 648 kbd in February to over 900 kbd by December, supported by modest volumes growth from existing FPSOs. Guyana’s growing light sweet crude output is already gaining traction in the Atlantic Basin, with Turkey’s Tupras emerging as a key buyer. The refiner has sharply increased imports of Payara Gold and Unity Gold after halting Russian Urals purchases due to U.S. sanctions. Arrivals have averaged a record 100 kbd so far in March, setting the stage for strong demand for Yellowtail—assuming it mirrors its predecessors in quality. Unity Gold sits at 34.5° API with 0.4% sulfur.

Guyana crude supply, Mbd

Source: Kpler

As expectations grow that a tougher stance from Donald Trump could further limit Venezuelan crude exports—particularly to the US Gulf Coast, which typically receives around 200 kbd of heavy sour barrels—alternative supplies such as Canada’s Cold Lake Blend and Mexico’s Maya have remained well supported. Western Canadian Select (WCS) at Hardisty has strengthened notably, trading at a $11/bbl discount to WTI Cushing—up nearly $4/bbl from early March and marking the narrowest discount since November. This firming comes amid tighter US crude inventories, which posted a counter-seasonal 3 Mbbls draw for the week ending 21 March, and a sharp rebound in Canadian crude exports to the US. Imports from Canada surged 59% w/w to 3.98 Mbd, lifting the four-week average to 3.72 Mbd—higher than both the previous week and the same period last year. With US refinery runs expected to climb further and Venezuelan flows likely to come under increasing pressure, WCS Hardisty differentials are poised to remain well supported in the near term. Additional support will come from seasonally declining crude supply in Alberta, as well as still tight inventories in Western Canada.

WCS Hardisty crude differentials and outright price, $/bbl

Source: Argus Media

The ongoing tightening in America’s heavy crude market has provided additional support to Mexican crude pricing. On 14 March, Pemex issued its April K-factors via its trading arm, raising adjustment factors across most grades and destinations. Increases were applied broadly for exports to the US, with the exception of Olmeca to the Gulf Coast, which remained unchanged, and a slight downward revision for Olmeca to the West Coast. Modest upward adjustments were also made for grades heading to Europe, the Middle East, and India. For the Asia-Pacific market, however, Maya and Olmeca saw reductions, while Zapoteco and Isthmus were slightly increased.

The price strength in Mexican grades comes somewhat unexpectedly, as crude exports have recovered sharply from January’s multi-year low—the lowest level in Kpler’s records dating back to 2013. March volumes are averaging around 900 kbd, up 100 kbd m/m, with Maya leading the rebound. Exports of the heavy sour grade have averaged above 500 kbd so far this month, reaching the top end of its 12-month range. Still, the medium-term outlook appears more constrained. Mexico’s overall crude production remains in structural decline, and a future ramp-up in domestic refining at the Olmeca refinery—more of a 2026 story—is expected to place further pressure on export volumes of Maya. Additionally, with the threat of US tariffs still hanging over trade flows, Pemex may increasingly look to diversify its crude sales away from North America, which in turn should keep Maya prices to the US Gulf Coast relatively supported.

Maya K-factor and differentials, $/bbl

Source: Argus Media

Atlantic Basin: New grades from Nigeria and Norway to enter markets in April

In the EU-27 bloc, we estimate that refinery maintenance will reduce crude intake by 400 kbd this month, bringing total throughput to 9.19 Mbd in March. A further decline to 9.09 Mbd is expected in April, with major facilities remaining offline—including ExxonMobil’s 240 kbd Port Jerome refinery, which is undergoing maintenance between March 1 to April 26. This will weigh primarily on imports of light crude grades such as Kazakh CPC, Azeri BTC, Norway’s Johan Sverdrup, and BFOET crudes. Adding further bearish pressure on these grades is the upcoming ramp up in supply of Johan Castberg. Originally slated to come online at the end of 2024, the project faced multiple delays, but first loading from the 220 kbd field is now scheduled for April 14–17. The initial 700 kb cargo has reportedly been purchased by Repsol and will be delivered to its 220 kbd Bilbao refinery, though pricing details remain undisclosed. Next month’s export programme includes four 700 kb cargoes—three to be loaded by Equinor and one by Johan Castberg partner Var Energi. Given Johan Castberg’s high pour point (+6°C), which necessitates constant heating during transit to prevent solidification, it is likely that the crude will remain within European markets. With its light and sweet quality (API 34.7°, SUL 0.16%), the grade is expected to pressure other light sweet crudes in the Mediterranean, North Sea, West Africa, and the US.

BFOET crude differentials, $/bbl

Source: Kpler

News emerged this week that a new Nigerian crude grade—Obodo—is set to enter the market in April. This follows the launch of the Utapate grade earlier in 2024 and Nembe in 2023. The Obodo grade is a medium sweet crude (API 27.65°, SUL 0.05%) produced from the onshore OML 150 block in the Niger Delta region. While production volumes have yet to be disclosed, Obodo is reportedly set to be priced in line with Bonga. The addition of Obodo will expand Nigeria’s offering of medium sweet grades, which currently includes Egina (27.3°, 0.2%), Nembe (30.0°, 0.2%), Usan (29.5°, 0.3%), Antan (28.2°, 0.3%), and Jones Creek (30.0°, 0.2%). These grades are typically exported to refineries in Canada, France, the Netherlands, Spain, Portugal, as well as Indonesia and India—suggesting that Obodo will likely target similar markets. Meanwhile, crude imports to Nigeria’s Dangote refinery are on track to total around 330 kbd in March—down from 450 kbd in February—despite a notably more diversified crude slate. While February imports were composed exclusively of light sweet Nigerian grades (mainly Bonny Light, Amenam, and Okwuibome), March deliveries included 130 kbd of WTI Midland, 40 kbd of Angola’s Pazflor, 40 kbd of Algeria’s Saharan Blend, and 40 kbd of Brazil’s Buzios. Notably, medium sweet crudes accounted for 25% of March deliveries—the highest monthly share to date. However, looking ahead, we expect a gradual shift back toward lighter crude grades. This adjustment comes in anticipation of a scheduled shutdown of the refinery’s RFCC unit in June due to technical issues (IIR), which will require a lighter feedstock mix going forward.

Nigeria crude and condensate exports, kbd

Source: Kpler

The Brent-Dubai EFS spread flipped into negative territory on 20 March, settling at -$0.18/bbl—the first time it has traded at a discount to the Middle Eastern benchmark since November 2023, and down from a February average of +$0.60/bbl. While the spread has recovered slightly in recent sessions, it remains relatively weak, settling at just $0.15/bbl on 26 March. Brent’s softness has largely been driven by rising supply from Kazakhstan, Brazil, Guyana, and Libya. Notably, Kazakhstan’s Tengiz expansion pushed CPC Blend exports to a record high in February. At the same time, seasonal declines in European crude demand have added further downward pressure. Conversely, Dubai has been supported by tightening Middle Eastern supply, as OPEC+ begins implementing fresh output cuts from March to counter earlier overproduction. Additionally, U.S. sanctions targeting a Chinese teapot refinery over imports of Iranian crude could significantly curtail Iranian exports, further tightening the Dubai-linked crude market. With the narrowing Brent-Dubai EFS making Atlantic Basin crudes more competitively priced for East of Suez buyers, we may see increased eastbound flows of CPC Blend cargoes for June and July delivery.

Brent-Dubai EFS spread

Source: Argus Media

Middle East and Asia: China holds off on new Iranian crude orders after US sanctions refinery

Chinese teapots appear to be holding off on new orders of Iranian crude after the U.S. sanctioned a Shandong-based refiner for the first time, signalling a tougher stance in Washington’s 'maximum pressure' campaign. No fresh deals have been reported since March 20, while offers for Iranian Light have slipped from -$0.8/bbl to -$1.5/bbl against ICE Brent on a delivered basis following the latest sanctions. Refiners are still weighing the risks of taking Iranian crude going forward, while closely watching the fallout facing the sanctioned 60 kbd Shouguang Luqing Petrochemicals. As of now, there are no signs that banks have cut off Luqing’s financing. If Luqing ultimately manages to secure financing and keep operations running, it could encourage other teapots—particularly those heavily reliant on Iranian crude as their main feedstock—to continue lifting Iranian cargoes.

China’s imports of Iranian crude are set to post another sharp month-on-month increase in March, with volumes forecast to reach 1.8 mbd. As of March 26, Iranian cargoes transported by vessels not listed under OFAC sanctions appeared to have discharged successfully, indicating that Chinese ports have not turned away Iranian crude despite tighter U.S. sanctions. Washington’s recent move to sanction Huizhou Huaying, an oil terminal in southern China, may prompt some ports to reassess the risks of accepting sanctioned vessels. However, our data shows that two Aframax tankers,  and TuracoNereus Sophia, both blacklisted by OFAC this year, managed to discharge Iranian crude at Yangshan and Dongying ports earlier this week.

China’s imports of Iranian crude/co by destination, kbd

Source: Kpler. March imports are as of Mar 26.

Syria has received its first imported crude cargoes since the fall of Bashar al-Assad's regime in December 2024. Over the weekend, the Aframax tanker Aquatica delivered 684 kb of Russian Novy Port crude at Baniyas port. Another vessel, the Suezmax Sakina, also appears to have offloaded Russian crude in Syria earlier this week. Sakina was carrying around 1 mb of heavy sour ARCO crude but seemed to have switched off its AIS transponder while approaching Baniyas. The 131 kbd Baniyas refinery ceased operations after Iranian crude shipments came to a halt. Before the fall of the Assad regime, Iran regularly supplied Baniyas with one to two Suezmax cargoes of crude oil per month. Syria’s other refinery, the 121 kbd Homs facility, has reportedly been receiving around 5 kbd of crude from domestic fields in the country’s northeast since February.

Despite the temporary easing of U.S. and EU sanctions on energy supplies to Syria, the Middle Eastern country is still struggling to secure crude from international markets. At the same time, major oil companies remain hesitant to reenter Syria’s upstream sector, citing persistent political instability and security risks that continue to undermine confidence. Amid this supply vacuum, Russia seized the opportunity to market its Arctic crude—produced by Gazpromneft and transported by shuttle tankers from the oilfields to export terminals—which came under U.S. sanctions in January. The first two vessels mentioned above that reached Baniyas have likewise been designated on the U.S. OFAC sanctions list.

Syria’s crude/co imports by origin, kbd

Source: Kpler

India is forecasted to receive around 1.8 mbd of Russia’s Urals crude in March, a four-month-high, driven by ample supply and competitive pricing. Heavy maintenance at Russian refineries and a pause in Turkish buying pushed Urals exports up to 1.74 mbd in February (+225 kbd m/m). Despite wider Urals discounts to Dated Brent on an FOB basis—around $15/bbl—soaring freight rates have driven up its delivered price in India. According to Argus Media, Urals has reached its highest assessed value in at least two years, trading at just $2.55/bbl below Dated Brent for May-arrival. Even so, Urals remains about $4-$5/bbl cheaper than Middle Eastern crude such as Basrah Medium in the Indian market, a margin that would encourage refiners to ramp up purchases and scale back spot tenders for alternative crudes.

That said, Middle Eastern producers will need to make significant cuts to their OSPs next month to defend market share in key markets like India and China, as the narrowing Brent-Dubai EFS is opening up arbitrage opportunities for Asian refiners to pull in more cargoes from the Atlantic Basin and Mediterranean. This week, the Suezmax tanker Tony discharged a cargo of Libya’s Es Sider crude at the Kochi Refinery—the first delivery of this grade to India since June 2021. Both India and China are set to see a spike in Kazakh-origin CPC Blend arrivals in April, as a result of growing production from the Tengiz oilfield.

Selected crude differentials on delivered India basis vs Dubai, $/bbl

Source: Kpler calculation based on Argus Media

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