Authored by Irina Slav via Oilprice.com,
Chinese refiners are not buying more U.S. oil despite the three-month truce agreed by Presidents Trump and Xi last month, Reuters reports, citing cargo loading plans of Chinese downstream operators.
According the Reuters, Chinese demand for U.S. crude has been dampened by political uncertainty around the trade war and, more directly, by relatively high costs of transportation. This means that despite the truce and future positive developments in bilateral talks on trade, U.S. oil will have yet to become a major element of China’s imported crude oil mix.
One Chinese analyst told Reuters that price was the top consideration of buyers and the price of U.S. oil simply wasn’t competitive.
“Chinese companies have little incentive to buy U.S. crude due to the wide availability of crude supplies today from Iran and Russia,” Seng Yick Tee from consultancy SIA Energy said. Yet trade tensions are not helping, either. With the constant threat of more tariffs, refiners are reluctant to change their buying habits.
“Even though the trade tension between China and the U.S. had been defused recently, the executives from the national oil companies hesitate to procure U.S. crude unless they are told to do so.”
U.S. crude oil exports hit a high of 23.95 million barrels in October 2017, data from the Energy Information Administration shows, but have since then declined, reaching 2.17 million barrels in September this year before Chinese refiners completely stopped buying U.S. crude in October.
Yet China’s total oil imports in October, on the other hand, hit 40.80 million tons (9.61 million bpd), of which teapots imported 8.22 million tons. This was the highest monthly oil import amount on record, according to customs data from Beijing. The increase came despite depressed refining margins that could have motivated lower appetite for crude but apparently did not. The independent refiners drove the increase as they sought to fulfill their import quotas until year-end.