Trade war will not end US oil exports



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The Sino-US trade war started a year ago and until last week, China had refrained from freezing import tariffs on US crude oil, even though 39, it announced other measures in retaliation for the US import tariffs on Chinese products. These days are over.

Last week, the trade war finally caught up with US exports of crude oil to China. What does this mean for the US oil industry?

Chinese refiners and traders have held their breath for a year now, fearing the day the government would finally unleash tariffs on crude oil imports into the United States. They will now have the chance to test their strategies to protect themselves from the risk of buying US oil in a pricing context that surprised oil tankers heading for China at sea.

China announced Friday that it will impose US $ 75 billion on US goods, including crude oil, in two batches, starting September 1 and December 15.

The 5% crude oil tariff – effective next Sunday – hit several oil tankers carrying US crude oil en route to China. Some of these tankers have already docked or will arrive before September 1 in Chinese ports, but others will not make the trip in time, reports S & P Global Platts, citing ship tracking data.

Chinese buyers have been hesitant to buy US crude for a year, fearing that tariffs will come at any time, disrupting their plans and making their oil more expensive. Many who have continued to buy oil from America cover the risks by having the opportunity to

alternative port destinations for cargoes.

Last month, Chinese imports of US crude oil were estimated at their highest level since the start of the trade war, according to customs data cited by Platts. China's imports for the month of August could also be high, as some people rushed to China under cable before the tariff came into effect. However, given that the Chinese announcement was announced a week before the end of August, many tankers will not travel more than 55 days in time to avoid tariffs.

In the middle of the trade war, the largest Chinese refiner, Sinopec, is currently preparing emergency plans for its imports from the United States, since it has signed a futures contract for the purchase of four shipments of very large oil tanker (VLCC), each of which can carry 2 million barrels of oil. -each month. According to Reuters sources, the tariff would increase by 3 dollars a barrel of US crude for Chinese buyers.

Sinopec plans to seek some kind of tax exemption on its imports of US crude oil, sources told Reuters. The Chinese refiner is also considering storing US oil in bonded warehouses, so as to not yet clear customs in China, or return it to other destinations, according to one source, in order to totally avoid customs duties. Related: Natural gas prices are ready for dramatic price increases

After somewhat higher imports in July and possibly August, Chinese imports of US crude are expected to fall again after the beginning of September and the entry into force of the tariff, according to some analysts, although some expect China to continue to import, even at a very low rate, US exports. oil.

According to JLC International, China will probably stop importing US crude oil next month.

"As China stops importing its crude oil, the United States will likely have to find more buyers for their steadily increasing oil production, but finding another market the size of China could Prove difficult, "said analysts at JLC ​​International earlier this week.

Still, total US crude oil sales in the Asian market will not be affected by the fact that other Asian countries are beginning to show a growing appetite for American grades that Chinese refiners would not want, said S & P Global Platts earlier this week.

According to ESAI Energy analysts, most Chinese private refiners will avoid US oil, but some state-owned traders could continue to import US oil at a rate of about 150 000 to 200 000 bpd for the rest of the year, as they could look for options such as tariff derogations, storage of oil in bonded tanks or transfer of cargo to other Asian countries.

"Overall, we expect US crude oil exports to Asia to increase from 1.2 million b / d in the first half to around 1.3 million b / d for the remainder of 2019, regardless Chinese customs on US crude, "ESAI Energy. said.

By Tsvetana Paraskova for Oilprice.com

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