UPDATE 1-China extends Iran oil import cut as sanctions mount
* China more than halves Iran oil imports in Feb, same as Jan
* Move adds to Iran woes after EU ramps up sanctions
* Japan refiners worried about Iran supplies
By Chen Aizhu
BEIJING, Jan 5 (Reuters) - China will reduce crude imports from Iran for a second month, sources said on Thursday, as the two remain divided over payment terms for Iranian crude targeted by ever tougher international sanctions.
The dispute underlines the difficulty Iran will have selling its oil after European Union governments on Wednesday agreed in principle on banning its import and as new U.S. sanctions target payments for the country's crude.
China is the top buyer of Iranian oil and also the fastest growing major oil importer, putting it in a strong position to negotiate for better terms after it more than halved January imports.
It has been scouring the globe for replacements, snapping up February cargoes from Vietnam, Russia, the Middle East and Africa at high premiums.
Refiners in number three buyer Japan on Thursday also expressed concern about being able to secure supplies of the Islamic Republic's crude, with the country's biggest refiner saying it is looking at possible alternatives.
China, which buys around 10 percent of Iran's crude exports, cut its January purchases by about 285,000 barrels per day, just over half of the total average daily amount it imported in 2011.
"February would be the same as January, with the same cut," said a Beijing-based senior crude trader who deals with Iranian oil.
The sticking point in talks is over the credit period. Top Chinese refiner Sinopec Corp, which processes around nine-tenths of China's Iranian oil imports, is insisting on 90 days to pay for imports, while Iran wants payment in 60 days.
Asked if there was any chance of agreeing a term supply contract by mid-January, normally the deadline for the two sides to fix February-loading cargoes, a second Beijing-based senior oil trader said, "I doubt it."
A senior National Iranian Oil Corp official told Reuters on Wednesday that two of three Chinese 2012 term deals have already been clinched.
"Iranians may believe that with most of the terms agreed, it's a done deal. But the most essential term, the credit period, remains outstanding," said the first Chinese trader.
"They look at it as a half-full cup, we look at it as half empty."
Under the 2011 deal, Sinopec lifted a total of about 465,000 bpd Iranian oil in two contracts -- one via state trader Zhuhai Zhenrong Corp and one it signed directly with the National Iranian Oil Company, China-based oil industry sources have said.
Sinopec's purchases in 2011 included a first-ever term contract of South Pars condensate of about 75,000 bpd, but this was largely removed from January liftings and now in February as well, a third Chinese oil industry official told Reuters.
The Chinese refiner has instead bought condensate from Australia as well as other Asia Pacific suppliers.
PetroChina, the second-largest Chinese refiner, bought roughly 50,000 bpd of Iranian oil last year, most through Zhuhai Zhenrong.
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