A few days after the United States and China announced a phase-one trade deal, Beijing announced it had removed six chemicals and oil derivatives from its list of tariffed U.S. imports.
The exemption will be in force for 12 months, ending on December 26, 2020, Reuters reports, citing a statement by the Chinese Finance Ministry.
The list of six products includes a type of high-density polyethylene and a low-density polyethylene—both petrochemical products—as well as white oil and food-grade petroleum wax.
Beijing has also removed an additional 5-percent tariff planned for U.S. propane imports, to have come into effect from this month. Another 25-perent tariff imposed on U.S. propane imports earlier, however, remain in place.
Tariffs on crude oil and other petroleum derivatives, however stayed. China imposed these after months of uncertainty in September this year. Set at 5 percent, the tariff shrunk U.S. oil exports to China further. According to customs data cited by Reuters, the average daily intake of U.S. oil by Chinese refiners and traders stood at less than 150,000 bpd for the period between January and October 2019.
The phase-one deal between China and the U.S., and the tariff relief that followed, pushed oil prices higher this week, with both Brent and West Texas Intermediate close to their highest in three months on Thursday despite a slight dip in both benchmarks.
The dip could be traced back to the EIA’s latest weekly petroleum status report that saw a crude oil inventory draw of 1.1 million barrels for the week to December 13 but also heftier inventory builds in gasoline—2.5 million barrels—and distillate fuels, at 1.5 million barrels.
The U.S.-China trade dispute has become the number-one factor oil traders are watching to glean the immediate future of oil’s fundamentals and, as a consequence, price trends. For now, tailwinds seem to be stronger than headwinds, which is reflecting positively on prices.
By Irina Slav for Oilprice.com
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However, the oil market should be wary of President Trump’s tendency to change his mind suddenly vis-s-vis a rapprochement with China particularly in the aftermath of his impeachment. Still, China’s roaring oil imports could sustain the momentum of the oil price’s surge.
China’s record-breaking crude oil imports hitting 11.8 million barrels a day (mbd) in November are the clearest indication that China’s economy is healthy and that the fundamentals of the global oil market are positive.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London