The United States' temporary authorisation on the sale of Iranian-origin crude, petroleum products and petrochemicals - in effect through August 21 - has not immediately translated into fresh orders from well-supplied Asian refiners, industry participants and analysts said.
The waiver, issued as part of diplomatic moves toward a potential final agreement with Tehran, comes at a time when many Asian refineries have rebuilt inventories after supply disruptions linked to the blockade of the Strait of Hormuz earlier this year. Those disruptions prompted aggressive buying from various suppliers including the U.S., Russia, Africa and Latin America. Now, with the strait reopening under the interim arrangement, oil that had been stranded for months is able to flow again, altering market dynamics.
Limited appetite among large refiners
Several sources said refiners across Asia have coverage through August and had already secured available cargoes prior to the waiver. "Most oil companies are covered till August. We were not expecting a waiver and had already bought whatever was available in the market," said a source at an Indian refiner, who added that the company booked some August crude cargoes at a premium.
Supplies from non-sanctioned sources have become affordable for some buyers, further reducing the incentive to pursue Iranian barrels. Three Asian refiners that last purchased Iranian oil nearly a decade ago told sources they have adequate crude on hand for the near term.
Japanese refiners face an additional practical barrier: the timing is tight and they would require trial runs before resuming purchases, Japanese oil sources said. Beyond operational hurdles, compliance concerns and the unresolved details of the temporary relief are keeping many buyers cautious.
China's independent refiners expected to dominate offtake
Given the limited interest among larger regional refiners, independent Chinese refiners - often called teapots - are seen as the likeliest primary buyers if Iranian barrels re-enter markets. Ship-tracking firm Kpler's lead analyst Sumit Ritolia said with India comfortable on crude through August, "the biggest beneficiary of any sanctions waiver on Iranian oil would likely be China, which needs crude for both processing and strategic stock replenishment."
Industry contacts said the National Iranian Oil Co has requested proposals from Asian refiners. One industry source close to NIOC said it is calculating delivered prices of rival crudes to China to support possible spot sales. Another source noted Iranian sellers had temporarily paused offering cargoes to China’s eastern Shandong province while they gauge demand from other buyers.
Still, Vortexa, another ship-tracking firm, cautioned that China’s teapots’ buying interest is not robust: output cuts since May have weakened their immediate needs, even as they remain Iran’s largest customers.
Ramping exports and barrels on water
Market watchers said Iran is likely to seize the opportunity to ship large volumes out of the Gulf while the waiver is in place. Vortexa reported that Iranian crude on water rose by about 6 million barrels over the previous 48 hours and now stands at roughly 126 million barrels. About half of that volume is already located in Asia - floating in the South China Sea or the Yellow Sea - with the remainder likely bound in that direction, Vortexa added.
Price pressure and competitive responses
The re-entry of Iranian crude onto the market is exerting downward pressure on global oil prices. Brent crude has declined by about 16% so far in June, sources said. Observers expect new Iranian volumes could widen discounts on Russian grades and compel Gulf producers such as Saudi Arabia to trim official selling prices in order to defend market share.
Fuel oil markets, especially high-sulphur grades, could see further downward pressure from sanction relief. Traders expect only a modest increase in Iranian fuel and bunker trade, however, because banking and payment frictions are still impeding robust transaction flows.
Persistent uncertainties for buyers
Buyers remain hesitant for several reasons explicitly cited by sources: uncertainty over whether the U.S. will extend sanctions relief beyond August, Washington’s broader policy stance on Iran, and lingering challenges with banking and payments necessary to facilitate trade.
As one Indian industry source put it, "We can start discussions and negotiations with Iranian suppliers, but any commitment will depend on continuity of the sanctions waiver."
These operational, legal and policy constraints mean that, despite an immediate increase in Iranian barrels on water, broad-based and rapid re-adoption of Iranian crude by large Asian refiners is unlikely in the near term. Instead, the market is expected to see Iranian volumes absorbed mainly by buyers willing and able to navigate those practical and compliance hurdles - with independent Chinese refiners appearing best positioned to do so if their appetite strengthens.