An independent Chinese refiner has suspended crude oil purchases from the United States and has now turned to Iran as one of its sources of crude, media reports, citing an official from the refiner, Dongming Petrochemical Group.
What's more, the source said that Beijing is planning to slap tariffs on U.S. crude oil imports and replace them with West African and Middle Eastern crude, including crude from Iran. China has already said that it will not comply with U.S. sanctions against Iran and it seems to be the only country for now in a position to do this.
U.S. crude oil exports to China reached 400,000 bpd at the beginning of this month, but now Beijing is planning to impose a 25-percent tariff on these as part of its retaliation for Trump's latest round of tariffs on US$34 billion worth of Chinese goods. The retaliation began with tariffs on 545 U.S. goods worth another US$34 billion, but, Reuters reports, the oil tariffs will be announced at a later date.
Energy analysts seem to believe that these oil tariffs are more or less a certainty, and now expect a reshuffle of crude oil imports to Asia. With China turning to Iran for its crude, U.S. oil could start flowing in greater amounts to another leading importer in the region, South Korea. Related: Big Oil's Next Major Move
"If China retaliates with tariffs on U.S. crude, that could improve South Korea's terms of buying U.S. crude...because the U.S. would need a market to sell to," on analyst, from the Korea Energy Economic Institute.
Meanwhile, South Korea's embassy in Iran this weekend rejected media reports that the country had suspended oil purchases from Iran under pressure from the United States. The country is the third-biggest buyer of Iranian crude in Asia, buying Iranian crude at an average daily rate of almost 300,000 barrels since March this year.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
Comments
The sooner President Trump drops his discredited “America first” policy, the better for the United States economy and the also the global economy. He is antagonizing the whole world and achieving nothing for America. When the global trade declines, America’s trade with the world declines. US oil exports to China will not be the only losers in the brewing trade war between China and the United States.
China’s economy is not only the world’s largest but is more integrated than the United States’ in the global trade system.
The mutual tariff retaliations between China and the United States show that China will not run from a fight with the United States. China has formidable weapons in its arsenal not least among them the threat to offload its holdings of US Treasury bills estimated at $1.3 trillion and also the petro-yuan which is starting to gain momentum and weight in the global oil market at the expense of the petrodollar.
President Trump will soon be forced to cut his losses and stop his trade war against China as he will realize that China will not bend the knee before him.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
Don’t quit your day job Dr. Mamdouh
Where this all going to end is the biggest crap shoot ever.
George Chakko, former U.N. correspondent and writer on OPEC issues, now retiree in Vienna, Austria.
Vienna, 10/07/2018 18:02 hrs CET