China imports unusually large amounts of crude oil, traders claim. This is to hide shipments of Iranian crude that are being transshipped off the coast of Malaysia. Market participants claim that traders have been using the tactic to sell Iranian crude as Malaysian oil for years, especially when selling it to China, which is the biggest buyer of U.S. sanctioned crude.

China officially has not imported Iranian crude oil since 2022. However, its customs data consistently shows that it imports more Malaysian crude than the Southeast Asian nation actually produces.

According to data released by the Chinese Customs on Thursday, China's crude oil imports from Indonesia increased from less than 100,000 tons in 2024, to 9.81 millions tons or 235.570 barrels per days for the entire year up to October. Indonesian data, however, shows that only 1.7 million tonnes of crude were exported between January-September. Only 25,000 tonnes of that crude oil was exported to China, according to the data.

China's imports of Iranian oil from Malaysia, which is the biggest trans-shipment center, have nearly halved from their peak this year in March, when they reached 8.5 million tonnes.

The Malaysian Marine Department, the Chinese and Indonesian Customs Authorities did not respond to comments.

Two traders who have knowledge of the issue and spoke under condition of anonymity said that banks are now more scrutinizing oil labeled as Malaysian.

One of the traders said that some banks reject documents showing Malaysian origin.

Indonesia could become a more attractive source of energy than Malaysia, thanks to US-Indonesia energy deals and plans for 17 modular refining plants in Indonesia. This sourcing could change on paper if the monitoring and enforcement are increased, said Pankaj Srivastava.

According to Energy Aspects, a consultancy, and a third trader, the shift was also prompted by Malaysia's announcement in July of its intention to enforce more stringently rules governing illegal ship-to -ship transfers (STS), where oil is transferred between tankers on sea to conceal its origin.

The traders stated that despite the change in labeling, Iranian oil is still being transported between ships near the coast of Malaysia.

Jianan SUN, an analyst at Energy Aspects, said that most of the STS transfer of Iranian crude oil destined for China takes place off the coasts of Malaysia.

Kpler, an analytics group, reports that in the first 10 months of 2014, China imported over 57 million tonnes, or 1,37 million barrels per day, of crude oil of Iranian origin or suspected Iranian origin, with more than 51 million tons moving via STS.

(source: Reuters)