Another Victim of the Trade War: U.S. Oil Exports to China
(Bloomberg) -- U.S. oil exports to China are becoming a casualty of Donald Trump’s trade war with Xi Jinping’s administration.
Unipec, the trading unit of top Chinese refiner Sinopec, has put a plan to boost U.S. crude imports on hold as it assesses the impact of the Asian nation’s trade war with America, according to company President Chen Bo. It previously planned to raise volumes to 500,000 barrels a day in 2019, compared with 300,000 barrels daily from January to August this year, he said.
The reluctance to boost purchases shows how the trade war between the major economies is reverberating in the world of energy trading even though crude isn’t yet subjected to tariffs. Buyers are already bracing for higher prices and a supply crunch due to impending American sanctions on Iran. Unipec’s caution means China -- the world’s biggest oil importer -- may not be able to fully take advantage of booming output at U.S. shale fields.
Earlier this year, Unipec had shunned U.S. crude purchases due to the threat of oil being included among U.S. imports that will incur tariffs in China. The trader later resumed some purchases after crude was removed from the list by Beijing. Still, the possibility that it may be re-introduced is making buyers wary.
China on Monday said talks to resolve the impasse over trade with the U.S. can’t happen as long as Trump keeps threatening to impose further tariffs. Just over an hour after the U.S. imposed further duties on another $200 billion in Chinese goods, Beijing published a document reiterating its position. Talks scheduled for this week were canceled as the imposition of fresh duties by Washington neared.
The disruption of trade with the U.S. will prove temporary, according to Chen, who said that American oil helps Unipec diversify supply sources. “We are confident that the trade war is for the short term, but in the long term we will very active in the U.S.,” he said on Monday at the Asia Pacific Petroleum Conference in Singapore.
The company will lift U.S. supply for third-party trading in September-October, Chen said in an interview on the sidelines of the APPEC event. West Texas Intermediate crude, the American benchmark, was up 0.4 percent at $72.35 a barrel at 7:13 a.m. London time on Tuesday.
Unipec was earlier this year embroiled in a dispute with Saudi Arabia, saying the top OPEC producer’s prices were costly and cutting purchases. That’s now been resolved and trading volumes with the Middle East nation are back to normal levels, according to Chen, who added that oil prices at $60-$80 a barrel are acceptable.
Before the tariff kerfuffle, U.S. crude exports to China had risen to 15 million barrels in June, the highest volume in data going back to 1996, according to U.S. Census Bureau and Energy Information Administration data. That made the Asian country the biggest buyer of American supply.
©2018 Bloomberg L.P.