Published: Пн, Июля 09, 2018
Business | By Kate Woods

China Trade Battle Heats Up = Are Beijing Tariffs on US Crude Next?

China Trade Battle Heats Up = Are Beijing Tariffs on US Crude Next?

The escalating trade friction between the U.S. and China, two of the world's biggest economies, remained the central focus among participants. China's Ministry of Commerce stated that it had no choice but to respond to the U.S., which they claim had "launched the largest war in economic history". Brent, the global benchmark, is now trading at around $77 a barrel.

American crude shipments to China now stand around 400,000 barrels per day (bpd), worth $1 billion a month at current prices.

Refiners in China were the top buyers of American crude oil in May, and have been regular importers since the USA revived domestic output and exports in recent years.

On Friday, the United States tariffs on $34 billion worth of Chinese goods were implemented.

Beijing has threatened a 25 percent tariff on US crude imports, although it has not specified a date.

An oil pump jack is seen at sunset near Midland, Texas, U.S., May 3, 2017.

"If China imposes tariffs, their refineries won't buy USA crude since it would cost more", Sandy Fielden, director of research for commodities and energy at Morningstar Inc., said by telephone.

An executive from China's Dongming Petrochemical Group said he expected Beijing to soon impose the tariff on United States oil imports.

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He added his refinery had cancelled US crude orders and would switch to Middle East or West African supplies instead.

"We expect the Chinese government to impose tariffs on (US) crude", the executive said, declining to be named as he was not authorised to speak to media.

The oil sanctions come after Opec and other supply-cutting countries agreed at a summit in June to reduce compliance from more than 150 per cent in May to about 100 per cent starting this month. "They can import more, but can they process it?"

Based on IEA estimates, the kingdom can raise production to just over 12 million bpd and sustain it at that level for an extended period, the report added. Together three three nations make up about 60 percent of the Persian Gulf state's exports.

Earlier this month, Reuters also reported that South Korea had upped crude oil imports from Kazakhstan, already looking for alternative supplies as the November 4 deadline for the sanctions draws nearer.

China responded promptly and slapped duties on the same amount of value unto U.S. products.

Oil prices gained on Monday following the data last week that showed U.S. crude inventories slumped to their lowest in as long as three years. However, if the ongoing pipeline bottleneck in the Permian is not resolved soon, said solace will prove to be short-lived.

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