The end of the truce in the U.S.-China trade war and the highly unpredictable nature of the next moves in the trade spat have made traders in China even more reluctant to buy U.S. crude oil despite its favorable economics, Chinese traders have told S&P Global Platts.
Chinese refiners and traders have been staying away from U.S.-origin crude cargoes for months amid the trade war, despite the fact that China doesn’t have tariffs imposed on U.S. oil. The escalation of the trade war at the beginning of this month, when U.S. President Donald Trump said the United States would levy a 10-percent tariff on the remaining US$300 billion worth of Chinese imports that hadn’t been subject to tariffs yet, has made China’s oil traders and refiners even more reluctant to contract U.S. cargoes.
“They won’t buy unless the US ceases tariffs and withdraws the statement saying that China was a currency manipulator,” a trader based in Shanghai and dealing with a U.S. crude oil supplier told S&P Global Platts, adding that Chinese customers are not touching spot cargoes and not even thinking of long-term agreements.
Some Chinese companies, however, do have such long-term deals, like Unipec, the trading unit of China’s biggest refiner Sinopec. According to S&P Global Platts, Unipec’s actual imports from the U.S. of crude oil into China are much lower than the volumes it is buying because many of the U.S.-origin cargoes are being sold midway en route to China to third parties.
Earlier this month, refinery and trading sources told S&P Global Platts that U.S. crude oil is unlikely to become a target of possible Chinese retaliatory tariffs. American crude oil is currently not an essential trade item between the United States and China, and China will likely target goods that could hurt more U.S. exporters and create maximum impact for U.S. exports in possible retaliatory tariffs, refinery and trade sources in China have told S&P Global Platts.