China Trade Battle Heats Up = Are Beijing Tariffs on US Crude Next?

China Trade Battle Heats Up = Are Beijing Tariffs on US Crude Next?

Reuters on Friday reported that Asian oil refiners are racing to secure crude supplies in anticipation of tensions with China (which has has threatened a 25 percent duty on imports of US crude) and the sanctions against Iran aimed at shutting the country out of oil market.

It is now trying to negotiate a waiver from the USA sanctions, but judging by the State Department's stated goal to reduce Iran's crude oil exports to zero, success is uncertain.

OPEC and non-OPEC producers reached an agreement in December 2016 to curtail oil output jointly and ease a global glut after more than two years of low prices.

The trade war has yet to have a direct impact on oil markets, but China has indicated it could place tariffs on US crude imports.

Benchmark Brent LCOc1 was up 60 cents at $77.71 a barrel by 1020 GMT.

Oil was mixed on Friday as a Canadian supply outage supported US crude prices, while an increase in production from OPEC's biggest exporter Saudi Arabia pushed Brent lower.

Oil prices seesawed on Friday in a nervous market as the United States implemented a raft of tariffs on Chinese goods, which should prompt Beijing to retaliate, potentially including a duty on USA crude imports.

"The Chinese have to do the tit-for-tat, they have to retaliate", said John Driscoll, director of consultancy JTD Energy, adding that cutting USA crude imports was a means "of retaliating (against) the a very substantial way".

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USA crude futures slipped on Thursday after data showed an unexpected 1.3-million-barrel build in crude inventories.

Meanwhile, Brent oil price was under pressure on Friday amid an escalating global trade tensions.

An executive from China's Dongming Petrochemical Group said he expected Beijing to soon impose the tariff on USA oil imports.

Earlier this month, Reuters also reported that South Korea had upped crude oil imports from Kazakhstan, already looking for alternative supplies as the November 4 deadline for the sanctions draws nearer.

"The Korean government is negotiating with the United States to get exemptions from the restrictions on Iranian oil purchases", it said.

John Driscoll, director of consultancy JTD Energy, suggested that China may even replace American oil with crude from Iran: "They [Chinese importers] are not going to be intimidated or swayed by USA sanctions". Saudi Arabia had earlier reported to the Organization of the Petroleum Exporting Countries that they had pumped 10.488 million bpd in June, up by 458,000 bpd from their self-reported figure for May, OPEC sources told Reuters. South Korea, a major buyer of Iranian oil and condensate, will not lift any Iranian oil in July for the first time since August 2012, three sources familiar with the matter said on Friday.

Venezuela is expected to lose another 400,000 bpd by year-end with production going to below 1 million bpd.

Although Saudi Arabia and Russian Federation have both said they would raise output to make up for these disruptions, FGE said "there simply is not enough capacity to make up for Iran's crude losses, plus Venezuela and Libya", and warned of the possibility of oil prices rising to $100 per barrel.

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