CHINA DOES NOT ALLOW SANCTIONED OIL TO ENTER ITS TERRITORY

Shandong Port Group, which operates ports in eastern China, has banned ships subject to US sanctions.

Sanctioned oil tankers are banned from ports on China's eastern coast, Reuters reports. This is where many independent refineries that import oil from countries subject to US sanctions are located.

The order from China's Shandong Port Group, which was seen by traders and given to Reuters, bars mooring, unloading and other port services for ships on the US Office of Foreign Assets Control (OFAC) list. Shandong Port Group itself did not respond to the agency's request.

Last year, Shandong province exported about 1.7 million barrels of oil a day from Iran, Russia and Venezuela, accounting for about 17 percent of China's imports, according to Kpler. Shandong Port Group controls a number of eastern ports, including Qingdao, Rizhao and Yantai.

If the ban goes into effect, it will mean higher freight costs for independent refiners in Shandong, which are the main buyers of the three countries' sanctioned crude at reduced prices, traders interviewed by Reuters added.

The port of Shandong said it does not expect a significant impact on independent Chinese refiners. However, the new sanctions restrictions will increase the cost of sanctioned oil for Chinese refiners. The active shadow fleet carrying Iranian, Russian and Venezuelan oil is estimated to contain about 669 tankers, according to Michelle Wiese Bockmann, principal analyst at Lloyd's List Intelligence's marine data team. Of that number, 250-300 tankers were typically involved in transporting Russian oil.

The outgoing Biden administration plans to impose sanctions on more than 100 tankers carrying Russian oil, sources told Reuters.

The shift to using non-sanctioned vessels could increase costs for refiners in Shandong, which already face low margins and weak demand, traders said.

Last month, the price of Iranian oil sold to China hit its highest level in years, as new U.S. sanctions limited transportation options and increased logistics costs.