China shuns US crude oil despite trade war truce

Source:Reuters-Global Times Published: 2018/12/23 17:28:39

Political uncertainty, rising freight costs reduce domestic firms’ incentives

China, the world's top oil importer, is set to start 2019 buying little or no crude from the US despite a three-month truce between the two nations, with relatively high freight costs from US and political uncertainty choking demand.

That muted appetite means the US, which became the world's top oil producer this year as its shale output hit record levels, will continue to hold only a sliver of China's market even as a wave of new refining capacity starts up in the country.

It also suggests that China is unlikely to use crude purchases to help plug a widening trade gap with the US, which remains a core source of tensions between the world's top two economies.

The US trade deficit with Beijing hit a record $43 billion in October as US firms stockpiled inventory from China to avoid higher tariffs that may kick in next year.

"Chinese companies have little incentive to buy US crude due to the wide availability of crude supplies today from Iran and Russia," said Seng Yick Tee, an analyst at Beijing-based consultancy SIA Energy.

"Even though the trade tension between China and the US have recently been defused, the executives from the national oil companies hesitate to procure US crude unless they are told to do so," Tee said.

China stopped US oil imports in October and November after the trade war intensified. The country resumed some imports from the US in December, but purchased just 1 million barrels, which is a minute portion of the more than 300 million barrels of total imports, data from Refinitiv showed.

Chinese refineries that used to purchase US oil regularly said they had not resumed buying due to uncertainty over the outlook for trade relations between Washington and Beijing, as well as rising freight costs and poor profit-margins for refining in the region.


blog comments powered by Disqus