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Sunday, 17 February 20:40 (GMT -05:00)



Stock and commodities markets

China declares crude oil war on USA


Beijing is now considering the opportunity to cut down on the export of crude oil from the United States in response to Washington's decision to raise the import duties on Chinese products. The energy war between the USa and China may also affect Russia.
 
Apart from the possible oil import cut, China is also reluctant to shrink the import of crude oil from Iran, which is something that the USA wants. International experts assume that this fact alone may have a more significant impact on the global oil market than all the OPEC decision recently made. 
 
At this point, Unipec (a trade branch of Sinopec, a Chinese corporation) has suspended the import of crude oil from the United States. The reason is the escalation of the trade conflict between the two major economies. The ultimate terms are not specified but Unipec has suspended the import at least until October 2018. By the way, it's interesting to note that the American export of crude oil to China in 2017 exceeded the joined export to the UK and the Netherlands, which are the third and forth-biggest buyers of American oil. 
 
Back in February 2018, China used to head the list of the biggest importers of American crude oil. This is confirmed by the EIA's report. Over the first 8 months of 2018, China bought 335 000 barrels of crude oil a day off the United States, according to Thomson Reuters Eikon.
 
For the sake of comparison, a year before that, China's import of American oil was limited to 100 000 b/d. In September, Reuters expects China to cut down on the import of American oil significantly - under 200K b/d. Apparently, this is not going to be a disaster for American oil companies.
 
Also, the production of crude oil in the United States came close to 15 million barrels a day in June, with only 2,6 millions b/d exported.
 
So, the big trade conflict is still underway. It's interesting to note that the oil import cuts are taking place amid this escalating conflict of the two superpowers. Apparently, this is a response to America's import duty hikes. for those of you who don't know, previously Donal Trump suggested raising the import duties for Chinese products all the way up to 25% instead of 10% planned before. Shortly after that, China urged the USA to resume the talks and announced counter-measures if the conflict escalates.
 
It's highly probable that higher American import duties will result in more Chinese companies refusing to buy American oil. Unipec is not the only CHinese company out there considering this step. PetroChina, Zhenhua Oil, and a range of other Chinese refineries may well do the same. By the way, Dongming Petrochemical Group, an independent Chinese refinery, already suspended the import of American oil in mid-July. Instead of buying American oil, CHinese companies are now buying Iranian oil, which is something Washington doesn't want. By the way, CHina accounts for 30% of the entire Iranian export of crude oil. The rest of the oil demand is covered by Russia, Saudi Arabia, and Angola.
 
At the same time, NordFX experts report that the current WTI oil price is close to $70/b.

 

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