Beijing: Tensions in the Middle East have heightened oil prices and introduced new uncertainties regarding Iranian crude flows, a situation experts say could significantly impact China's refining sector. This comes as Venezuela, another vital source of discounted oil, faces constraints.

According to Anadolu Agency, China, the world's largest crude oil importer, brings in about 11.6 million barrels per day (bpd) as of 2025, with estimates suggesting that around 2.6 million bpd of these imports are discounted or sanctioned crude. Approximately 1.38 million bpd come from Iran, making Tehran a crucial supplier for China. These discounted barrels are especially critical for independent refiners in Shandong, which rely on lower-cost crude to stay competitive.

Iran's exports are under threat due to its escalating conflict with Israel and the US, while Venezuelan shipments have already decreased following US actions against President Nicolas Maduro. Despite these risks, analysts believe China's supply chain has buffers to mitigate immediate disruptions. Matt Smith, lead oil analyst at Kpler, noted that about 50 million barrels of Iranian crude are currently positioned near China, providing a cushion against potential supply interruptions.

Smith added that China has been increasing its intake of Russian crude due to growing discounts, making Russia the leading supplier for Shandong since late last year. However, disruptions in the Strait of Hormuz could pose a more significant threat to China's energy security, affecting nearly half of its seaborne crude imports.

Independent refineries in eastern China, heavily reliant on Iranian oil, could be the first affected by any supply disruptions. Tom Reed, China crude analyst at Argus Media, highlighted that these refineries process around 2.5 million bpd, with Iranian supplies being central to their operations. If Iranian flows were interrupted, refiners might have to cut operations or compete for more expensive global supplies, potentially eroding profit margins.

Reed warned that the loss of discounted Iranian and Venezuelan crude could lead to refinery run cuts or shutdowns, tightening domestic fuel supply and increasing prices for gasoline and diesel. However, the impact might be mitigated by structural changes in China's transport sector, with a growing shift towards electric vehicles reducing demand for traditional fuels.

While the petrochemical sector may be less affected due to its reliance on state-owned companies for feedstock, transport fuels could face more significant pressure from supply disruptions. Despite these challenges, China's diversified crude import portfolio, including sources from Brazil, West Africa, and Canada, provides it with more options than other Asian economies.