China’s Hengli seeks West African, Middle Eastern oil after US sanctions: sources

[SINGAPORE] China’s Hengli Petrochemical, sanctioned by the US for allegedly purchasing Iranian oil, has bought at least 2 million barrels of West African crude and is seeking further mainstream supply, several trade sources said, as the refiner looks to get off the US blacklist.

Hengli, which was penalised by Washington in April and has denied buying Iranian oil, is looking to source entirely non-sanctioned oil, six of the people said.

Privately owned Hengli, which operates a 400,000 barrels-per-day refinery in the north-eastern city of Dalian, has recently inquired about buying cargoes of West African and non-Iranian Middle Eastern crude for delivery from June onwards, multiple sources said.

It bought at least 2 million barrels of West African crude for China delivery around late June or July, three of the sources said.

Hengli and the US Treasury did not respond to requests for comment. All of the sources spoke on the condition of anonymity due to the sensitivity of the matter.

While China rejects unilateral sanctions, such a designation can deter counterparties from dealing with sanctioned companies for fear of being penalised by the US government.

A company can seek removal from the sanctions list by providing information “that establishes that an insufficient basis exists for the listing or that the circumstances resulting in the listing no longer apply,” according to the US Treasury’s Office of Foreign Assets Control.

Seeking sanctions removal

Hengli said in late April it would seek a legal path for removal from the sanctions list, and that it held crude inventories to feed at least three months of processing and would continue buying oil using China’s renminbi currency.

Several trade sources said that supplying Hengli with non-sanctioned oil would be complicated as sellers would not want to be exposed to potential secondary sanctions, meaning any such transactions would be made through a chain of middlemen.

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By contrast, another private Chinese refiner, Shandong Yulong Petrochemical, became even more reliant on Russian crude after it was sanctioned by the United Kingdom and the European Union in 2025 over Russian oil purchases, making it difficult to buy mainstream crude, sources said.

Yulong did not immediately respond to a request for comment on its oil purchases.

Chinese independent refineries, the main buyers of Iranian oil, face dwindling supply from the Middle East producer as the US-Israeli war on Iran enters a fourth month and a US naval blockade in place since Apr 13 curtails Iranian exports.

Hengli had since late 2024 been heavily reliant on Iranian oil and had also purchased Russian crude, according to multiple traders.

Falling crude inventories have forced Hengli to reduce its June processing rates to slightly below 70 per cent from just over 80 per cent in May, two of the people said.

In May, Reuters reported that Hengli’s former Singapore-based trading arm planned to cease operations in the wake of US sanctions.

China’s imports of Iranian crude fell to 1.19 million barrels per day in May, the lowest since September, Kpler data showed. REUTERS