China’s private refiners snap up Middle East crude as Hormuz flows surge

China's independent refiners are moving swiftly to capitalize on falling Middle Eastern crude prices as oil shipments through the Strait of Hormuz accelerate following a US-Iran ceasefire agreement, marking a reversal after months of severely constrained Gulf supply.

Private Refiners Return to the Spot Market

Rongsheng Petrochemical has purchased Saudi crude on a spot basis for July arrival, while Shandong Chambroad Petrochemicals bought Iraq's Basrah grade for August delivery, according to Bloomberg, citing traders familiar with the transactions. Shenghong Petrochemical Group also acquired Upper Zakum crude from the United Arab Emirates.bloomberg.com+1

The buying spree comes as Gulf producers compete for Asian market share after months of disrupted flows. Saudi Aramco slashed its July official selling price for Arab Light crude to Asia by $6 a barrel — the largest cut since 2022 — setting a premium of $9.50 over the Dubai/Oman benchmark, down from $15.50 in June. The steep reduction reflects the broader shift in market conditions since the Hormuz reopening, with Middle Eastern crude trading in a bearish contango structure and Brent falling below $75 a barrel in late June for the first time since the war began.reuters.com+2

Hormuz Reopening Floods Markets

The ceasefire agreement finalized between June 15 and 18 established a 60-day commercial shipping window through the strait, which had been effectively closed since the US-Israeli conflict with Iran escalated in late February. About 10 million barrels of Saudi crude cleared the waterway in recent days as supertankers loaded at the port of Ras Tanura.dailymotion.com+1

The sudden influx has left Asian buyers "inundated with offers," according to Bloomberg, with some refiners even redirecting excess Middle Eastern supply to the US West Coast, where strategic reserves have fallen to multi-decade lows. China's crude imports had plunged to an eight-year low during the disruption, with refiners slashing output to the weakest level in nearly four years.energyconnects.com+2

Beijing Eases Export Restrictions

Alongside the renewed crude purchasing, Beijing has raised its monthly refined fuel export allowance for state-owned refiners to 800,000 metric tons in July, up from roughly 600,000 tons in June, with no destination restrictions, according to Reuters. The move signals growing confidence that crude supplies will stabilize as Hormuz flows recover, though analysts at Wood Mackenzie have cautioned that full restoration of pre-war oil volumes, particularly from damaged Iraqi and Kuwaiti infrastructure, could stretch into 2027.reuters.com+3