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China Masks Oil Imports Via Ship Transfers as Sanctions Bite

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China Masks Oil Imports Via Ship Transfers as Sanctions Bite

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Chinese oil imports from ship-to-ship transfers surged last month as flows from some traditional suppliers were crimped by the White House’s aggressive trade and foreign policies.

Some 910,000 tons of crude, three times as much as in August, was offloaded at Chinese ports after being transferred in the South China Sea, according to ship-tracking data compiled by Bloomberg. It’s unclear where this oil came from, but moving crude from one vessel to another at sea is a common way of disguising the origin of cargoes.

See also: Going Dark, Fake Voyages: Tactics to Skirt Trade Sanctions

The world’s biggest crude importer has been struggling to replace lost barrels from Iran and Venezuela, which have been hit by White House sanctions this year. Cargoes from the U.S. also dropped markedly last month, the data show, after Beijing imposed tariffs on American oil for the first time on Sept. 1 as the trade war heated up. Meanwhile, shipments from Malaysia almost tripled.

“I think its highly likely that these ship-to-ship and Malaysian volumes are Iranian or Venezuelan crude,” said Michal Meidan, director of the China Energy Programme at the Oxford Institute for Energy Studies. “But of course the whole point here is to make it hard to be sure.”

No one responded immediately to faxed questions sent to China’s Ministry of Commerce and the General Administration of Customs.

Imports from Malaysia rose to 1.385 million tons last month, making it the seventh-biggest supplier to China, up from 16th in August. Much of that oil has also been transferred at sea in the Malacca Strait, a common location for exchanging cargoes. Malaysian domestic production is limited, so it’s likely the increased volumes are coming from other countries and being blended in the Southeast Asian nation, said Liu Yuntao, an analyst at Energy Aspects Ltd.

Chinese imports from the U.S. fell 76% to 420,000 tons in September from August. Shipments from Venezuela dropped 55% to 570,000 tons. Cargoes from Iran actually rose 82% to 520,000 tons, but are well below the 3.04 million tons imported in April before waivers from U.S. sanctions expired.

Some of the oil coming from Malaysia may be from Venezuela, according to shipping analytics company Vortexa.

“We have observed a rise in ship-to-ship transfers of Venezuelan crude near Malaysia’s Tanjung Bruas in recent months headed for China,” said Serena Huang, a Singapore-based senior analyst at Vortexa. “Venezuela’s heavy-sour crude has been part of the staple diet of Chinese independent refiners, and direct exports of the crude have been impeded by the U.S. sanctions.”

(Adds response from Chinese authorities in 5th paragraph.)

To contact Bloomberg News staff for this story: Sarah Chen in Beijing at schen514@bloomberg.net;Ann Koh in Singapore at akoh15@bloomberg.net

To contact the editors responsible for this story: Serene Cheong at scheong20@bloomberg.net, Andrew Janes, Ben Sharples

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