China retaliates with levies in US crude oil

Source: REUTERS/Ernest Scheyder/File Photo

Beijing took international oil markets by surprise on Friday, threatening to impose duties on crude oil, natural gas and other energy products imported from USA, although China is now first among others in US oil imports.

«This is a really big deal. China is essentially the major US crude oil importer  now and thus a serious issue for the market. And things are going to become more bad, if refined products come into discussion. Obviously, this will be a crucial development», Matt Smith, head of ClipperData research directorate for raw materials, pointed out.

China is now importing almost 363.000 barrels of crude oil per day, which means that together with Canada they come first in importers race, as reported by the US Department of Energy. China is also importing 200.000 extra barrels of other energy products, such as propane, per day.

US energy industry has significantly increased its production potentials due to shale deposits, getting the daily production up to 10,9 million barrels of crude oil per day, an amount without historical precedent. USA are now exporting about 2 million barrels per day out of this amount. President Trump beats the drum for their dominant position in oil production as one of the keys of US global influence.

Moreover, Washington urges other governments, and Beijing among them, to buy more US crude oil and lower their supplies from Iran, after Trump had withdrawn USA from the 2015 agreement on the Iranian nuclear programme. China is the largest buyer of Iranian oil: they imported 650.000 barrels per day during the first six months of 2018. It has not been clear yet if they intent to reduce imports from Iran.

If taxes will be imposed on US crude oil, this would prevent Chinese refineries from buying it. This threat exists while other petroleum-exporting countries, with Saudi Arabia and Russia among them, are up to increase their production, following the OPEC session next week.

Serious concern has been caused to energy industry companies due to the Chinese threat to impose duties on imported US liquidized natural gas, one of US products whose exports to China has been substantially increased lately.