China surprises with threat on US oil exports

  • Markets Premium
  • Friday, 15 Jun 2018

FILE PHOTO: An oil pump is seen operating in the Permian Basin near Midland, Texas, U.S. on May 3, 2017. REUTERS

NEW YORK: Beijing surprised oil markets with threats to levy tariffs on imports of U.S. crude oil, natural gas and other energy products on Friday, just as China has risen to the top of the list of importers of oil from the United States.

China responded to US$50 billion in tariffs imposed by U.S. President Donald Trump with a similar amount of levies on a variety of U.S. goods. But China also said it would impose tariffs on U.S. energy products, which analysts considered a surprise as previous tariff threats had centred on agricultural goods and automobiles.

"This is a big deal. China is essentially the largest customer for U.S. crude now, and so for crude it's an issue, let alone when you involve (refined) products, too. This is obviously a big development," said Matt Smith, director of commodity research at ClipperData.

China currently imports about 363,000 barrels of U.S. crude daily, on par with Canada as the biggest U.S. crude importer, according to U.S. Energy Department figures. It also takes in an additional 200,000 barrels a day (bpd) of other products like propane.

The U.S. energy industry has been buoyed by production from the nation's shale fields, boosting overall daily oil production to a record 10.9 million bpd. Of that, the United States is now exporting about 2 million bpd, and Trump has touted dominance in energy production and export as key to American global influence.

The United States has also been urging other nations, including China, to buy more U.S. energy and limit purchases of Iranian crude after Trump pulled out of a 2015 nuclear arms agreement with Tehran. China is the largest buyer of Iranian oil, purchasing 650,000 bpd in the first quarter of 2018, and it is unclear if it plans to reduce those purchases.

A tariff would discourage Chinese refiners from buying U.S. crude imports.

The threatened tariff by China comes just as major producers including Saudi Arabia and Russia look set to increase production at next week's meeting of the Organization of Petroleum Exporting Countries, along with other non-member states.

China is also a major importer of other products such as propane, and tariffs would boost prices for that and several other petroleum products, said Bernadette Johnson, vice president at Drillinginfo in Denver. She also said sellers of liquefied natural gas (LNG), also emerging as a U.S. export to China, have been worried about tariffs.

"The constant back-and-forth about the tariffs creates a lot of market uncertainty that makes it harder to sell cargoes or sign long-term (trade) deals," she said. - Reuters

Article type: metered
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights

oil , US , China , energy , tariffs , Trump , Xi , trade , war ,


Next In Business News

Oil prices fall on recession fears, on track for third weekly loss Premium
PNB to begin offering access to financial advice, planning at low base entry Premium
Lamborghini to invest at least 1.8 billion euros in path towards electrification Premium
Zoom bets on corporate customers to stem post-pandemic crash Premium
PLS Plantations appoints Lee Hun Kheng as group CEO Premium
The national 4IR policy at 1: Connecting Malaysia to the future Premium
Powerwell appoints Adam Yee as deputy managing director Premium
Awantec aims to provide Google Cloud training to 5,000 public sector employees Premium
Some investors bet top growth stocks will thrive in US recession Premium
FBM KLCI shrugs off slow start Premium

Others Also Read