Page 11 - NorthAmOil Week 33

NorthAmOil COMMENTARY NorthAmOil

China ramps up US

crude purchases

China is stepping up its purchases of US oil

ahead of a preliminary trade deal between

the two countries coming up for review

US-CHINA CHINA is ramping up its imports of US crude ultimately lead to the Phase 1 deal falling apart
according to media reports in recent days. The sooner rather than later.
WHAT: uptick comes ahead of a review of a preliminary
China is ramping up its trade deal agreed between the two countries in On the up
purchases of US crude January as they attempted to find a way out of The news that Chinese imports of US crude
over the coming weeks, their trade war. would rise was first reported by Reuters on
based on tanker booking Under the Phase 1 deal, China agreed to August 14. The news service cited US traders
estimates. increase its purchases of US goods and services and shipbrokers, as well as Chinese importers, as
by at least $200bn over 2020-2021, including an saying that at least 20mn barrels of US crude had
WHY: additional $52.4bn worth of energy purchases, been tentatively booked to be shipped to China
The country agreed in from a baseline of $9.1bn in 2017. The amount in August and September.
January to buy more of US energy products that China pledged to Within days, Bloomberg cited estimates by
US energy, and that buy in 2020 alone was worth $18.5bn above the market intelligence firm Vortexa, based on
preliminary deal is due to 2017 baseline. provisional tanker bookings, that up to 14mn
be reviewed. Critics were already questioning how real- barrels of US oil would be loaded next month
istic the targets were, before the coronavirus for delivery to China. This is equivalent to seven
WHAT NEXT: (COVID-19) pandemic forced the Asian coun- fully loaded very large crude carriers (VLCCs).
Doubts remain about try to lock down, severely hitting its energy Sources speaking to both Reuters and
the deal between two demand. However, China’s rapid and aggressive Bloomberg believe the ramp-up in Chinese
countries surviving. response to the outbreak – which originated purchases of US energy is politically motivated
in the country – has helped it suppress infec- rather than driven by economics, as prices of oil
tion rates much more quickly than many other from other regions are currently just as favour-
countries and thus restore its industrial activity able, if not more so.
sooner. The surge is being driven by state-owned
This is helping China to step up its purchases Chinese players PetroChina and Sinopec – the
of US oil – and liquefied natural gas (LNG) – country’s largest refiner. However, even with
but it is still far behind its target, and there are a the ramp-up, China is still falling far short of
number of other complicating factors that could its agreed targets. US Census Bureau data show

A preliminary trade deal
between the US and
China was signed in
January.

Week 33 20•August•2020 www. NEWSBASE .com P11