China’s state tankers sidestep from chokepoints, shifting to offshore transfers

China’s biggest tanker operators are abandoning the Middle East’s two main chokepoints — despite having more room than most to navigate. Cosco Shipping Energy Transportation and CMES have stopped sending tankers through both Hormuz and Bab Al Mandab, instead collecting Gulf crude from transfer points outside the danger zone.

This isn’t a marginal retreat: State-owned Cosco and CMES operate more than 100 VLCCs between them and handled roughly half of China’s Middle Eastern crude imports before the regional disruptions. Their decision to avoid chokepoints reportedly followed communications with China’s central authorities, sources told Reuters last week, while CMES publicly told investors last month that its vessels would stay out of Hormuz for the time being.

The retreat is already visible at Hormuz: Three Hong Kong-flagged, China-linked supertankers abruptly reversed course around the strait last week, Bloomberg reported. The Hestia entered the Gulf along Oman’s coast before turning back out, while the Iraq-bound Erecter also abandoned its passage. The Sea V — carrying Iraqi crude — reversed course while approaching Hormuz from inside the Gulf and is now idling near its exit. It is unclear what prompted the U-turns.

The same caution extends to Bab Al Mandab: The Coslucky Lake — among the last Cosco tankers to enter the Red Sea to collect Saudi crude from Yanbu — changed course in early August and sailed empty through the Suez Canal to instead load at Egypt’s Sidi Kerir.

Why this matters: China-linked vessels have been among the few able to navigate the region’s contested waterways under Iran’s selective-access policy — but they are not one uniform fleet. Much of the chokepoint traffic involved Iran-linked, smaller, or already sanctioned operators with less additional compliance exposure. Cosco and CMES sit at the opposite end of the market: the state-controlled giants avoid Iranian oil and depend on mainstream ins’ers and international counterparties, fearing ins. restriction and sanctions exposure. That leaves China’s biggest carriers collecting crude outside the conflict zone while more sanctions-tolerant vessels handle the risky first leg.

Their solution is to collect barrels outside the danger zone. Four Cosco-operated VLCCs and one CMES vessel loaded through transfers at Fujairah in July, with around two dozen more vessels controlled by the two companies scheduled to load outside the Gulf between August and mid-September. Ship-to-ship transfers involving China- and Hong Kong-owned vessels outside the Gulf surged above 600k bbl / d in both June and July, from virtually nothing in April and May, Reuters reports, citing Kpler data.

Adnoc built the supply chain making that possible: Sustained shuttle shipments from inside the Gulf to transfer points beyond Hormuz have allowed the Emirati producer to sell more than 100 mn barrels through tenders. The arrangement separates the riskiest leg from the main voyage, with buyers collecting outside the strait without exposing their own tankers.

Chinese buyers were already active on the other side of this trade. They participated in recent tenders for spot Middle Eastern crude “clandestinely” shipped through Hormuz by Adnoc and other regional producers, according to the Middle East Economic Survey (MEES). The resulting increase in prompt barrels created a “mini-glut” in July, with market sources telling MEES that Chinese buyers have since begun reselling some of the cargoes they picked up during that period.

Saudi Aramco is now following suit — and Chinese buyers are returning. In a rare move, the state oil giant is privately offering some Asian refiners Arab Medium and Arab Heavy through ship-to-ship transfers off Fujairah, including cargoes for September loading, Reuters separately reports, citing two unnamed sources. It remains unclear how Aramco is moving cargoes to Fujairah. PetroChina, Sinochem, Unipec, and Rongsheng Petrochemical purchased a combined 10 mn barrels of prompt-loading Arab Medium and Arab Heavy through the tender, traders told Bloomberg.

Term supplies are also recovering. Aramco separately allocated at least 14 mn barrels of September-loading crude to Chinese refiners under annual contracts.That is a meaningful pickup, but still well below the 40-50 mn barrels China typically imported from Saudi crude each month before the war.

The significance is in how the trade is returning: Chinese demand for Saudi crude is recovering without China’s largest carriers returning to Hormuz. Producers are increasingly taking responsibility for moving the barrels across the strait before handing them over to buyers and their preferred fleets outside the Gulf.

A squeeze on Iranian crude could drive more Chinese buyers toward those arrangements. Around 40 mn barrels of Iranian crude are sitting on vessels near Singapore, but only 10% remained unsold, Bloomberg reports, citing Kpler. Another 41 mn barrels and 22 empty tanks are trapped inside the Gulf following the renewal of the US blockade in July.

China’s independent refiners could therefore be next: Kpler expects virtually no new Iranian supplies to be available for delivery from late September. Chinese teapots — that normally absorb those discounted barrels — could respond by buying alternative grades or cutting refinery runs from October.

But not every producer is offering delivery outside the danger zone: Iraq’ Somo and QatarEnergy have launched rare tenders requiring buyers to collect crude from terminals inside Hormuz, Reuters reports. However, compared to Aramco and Adnoc, Iraq and Qatar are asking buyers to send their own vessels inside.

This is where the market splits: Producers able and willing to shuttle barrels through Hormuz can reach China’s risk-averse mainstream carriers and potentially command better terms. Producers that leave the crossing to buyers may have to offer deeper discounts or rely on the smaller pool of vessels still willing to enter.

The economics reward the workaround: Daily freight on the Oman-China route reached USD 140k last week, generating an estimated USD 110k daily margin per tanker. Comparable voyages earned some USD 30-40k a day before the war, a Chinese shipping executive told Reuters.

But the workaround is now becoming a target itself: Iran has accused dozens of vessels of violating its transit protocols and threatened them with fines, detention, or confiscation, the Financial Times reports. The list includes vessels operated by Adnoc and South Korea’s Sinokor — two of the fleets involved in shuttle movements through Hormuz — while Iran has warned that ships conducting transfers with blacklisted vessels could also face restrictions.

That threatens the entire operating model: Gulf producers can separate the risky crossing from the buyer’s main voyage, but they cannot eliminate it. If Iran begins penalizing both the shuttle vessels and the tankers receiving their cargo, the risk extends beyond the first leg and into the transfer network China’s biggest carriers are using to stay outside the strait.