Chinese refiners are looking for alternative supplies to U.S. crude oil after the Chinese government slapped tariffs on U.S. crude in retaliation for Trump’s additional 10% import tax rate on Chinese goods.
Bloomberg reports that Chinese state majors were looking to resell U.S. oil cargos for delivery over the next two months and seeking alternatives from the Middle East and Africa, according to traders. Energy Aspects has calculated that Chinese importers of petroleum would need to find some 200,000 barrels daily in alternative crude oil supply to replace U.S. volumes.
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China slapped a 10% import tariff on U.S. crude oil earlier this month, along with a 15% levy on U.S. coal and liquefied natural gas. Considering the small volumes of U.S. oil and LNG ending up in China in recent months, the tariffs are unlikely to hurt either the U.S. or China too much in the near term, according to analysts.
Yet analysts also suggested that the reluctance of Chinese importers to buy the more expensive American crude with the tariff is set to tighten the lighter sweeter crude markets as Beijing will seek alternatives to the U.S. crude and source more barrels from West Africa—which is what Chinese importers are already doing, per the Bloomberg report.
The impact on LNG markets, however, is going to be more marked as U.S. liquefied gas has represented about 12% of Chinese LNG imports in total over the past few months. According to an earlier Bloomberg report, Chinese LNG buyers were already looking for buyers to whom they could resell already contracted U.S. volumes, using a so-called flexibility destination clause under long-term deals they have with U.S. suppliers.
“These tariffs on U.S. LNG directly undermine the Trump administration’s efforts to expand American energy exports and strengthen our geopolitical influence,” Charlie Riedl, Executive Director of the Center for LNG, a trade group representing many U.S. LNG exporters and developers, told Reuters earlier this week.
By Irina Slav for Oilprice.com
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