Page 10 - AsianOil Week 33

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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

COMMENTARY CHINA is ramping up its imports of US crude On the up
according to media reports in recent days. The The news that Chinese imports of US crude
uptick comes ahead of a review of a preliminary would rise was first reported by Reuters on
WHAT: trade deal agreed between the two countries in August 14. The news service cited US traders
China is ramping up its January as they attempted to find a way out of and shipbrokers, as well as Chinese importers, as
purchases of US crude their trade war. saying that at least 20mn barrels of US crude had
over the coming weeks, Under the Phase 1 deal, China agreed to been tentatively booked to be shipped to China
based on tanker booking increase its purchases of US goods and services in August and September.
estimates. by at least $200bn over 2020-2021, including an Within days, Bloomberg cited estimates
additional $52.4bn worth of energy purchases, by market intelligence firm Vortexa, based on
WHY: from a baseline of $9.1bn in 2017. The amount provisional tanker bookings, that up to 14mn
The country agreed in of US energy products that China pledged to buy barrels of US oil would be loaded next month
January to buy more in 2020 alone was worth $18.5bn above the 2017 for delivery to China. This is equivalent to seven
US energy, and that baseline. fully loaded very large crude carriers (VLCCs).
preliminary deal is due to Critics were already questioning how real- Sources speaking to both Reuters and
be reviewed. istic the targets were, before the coronavirus Bloomberg believe the ramp-up in Chinese
(COVID-19) pandemic forced the Asian coun- purchases of US energy is politically motivated
WHAT NEXT: try to lock down, severely hitting its energy rather than driven by economics, as prices of oil
Doubts remain about demand. However, China’s rapid and aggressive from other regions are currently just as favoura-
the deal between two response to the outbreak – which originated ble, if not more so.
countries surviving. in the country – has helped it suppress infec- The surge is being driven by state-owned
tion rates much more quickly than many other Chinese players PetroChina and Sinopec – the
countries and thus restore its industrial activity country’s largest refiner. However, even with
sooner. the ramp-up, China is still falling far short of
This is helping China to step up its purchases its agreed targets. US Census Bureau data show
of US oil – and liquefied natural gas (LNG) – that Chinese purchases of US crude in the year to
but it is still far behind its target, and there are a June 30 only amounted to $2.06bn. Meanwhile,
number of other complicating factors that could S&P Global Market Intelligence unit Panjiva has
ultimately lead to the Phase 1 deal falling apart estimated that China’s energy purchases from
sooner rather than later. the US in the first half totalled $2.9bn.

P10 www. NEWSBASE .com Week 33 20•August•2020