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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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Chinese Refiner Stops U.S. Oil Imports, Turns To Iranian Crude

Chinese oil refinery

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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  • Mamdouh G Salameh on July 09 2018 said:
    Not only will China impose tariffs on US oil exports but it will retaliate blow by blow to any new tariffs imposed on it by President Trump. Part of its retaliation will be to antagonise the United States by replacing US oil imports with Iranian crude and totally ignoring US sanctions on Iran.

    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
  • Terry Carlson on July 09 2018 said:
    Here's the thing. China needs the U.S. market more than we need them, so embargo away.
  • Jace Parkhurst on July 09 2018 said:
    “China’s economy is... the world’s largest”?

    Don’t quit your day job Dr. Mamdouh
  • Lee James on July 10 2018 said:
    Fox and Friends says to Trump, "burn oil and pretend the oil is all produced domestically; damn the torpedoes from partners and allies!"

    Where this all going to end is the biggest crap shoot ever.
  • John A. Scior on July 10 2018 said:
    I am sure also that China will be pressing hard for a discount on the Iranian Crude as it appears to be one of Irans few customers ( officially ). I have heard about this ( weapon ) idea of China dumping its Treasury holdings. It would be devastating to China's currency and what would they sell those Treasuries in exchange for ? Euros ? The "America First" policy in my opinion won as a political strategy propoganda because much of American manufacturing has been devastated and workers ( American ) have had to take employment in less prosperous jobs. Yes, Americans can buy cheaper toasters at Walmart, but you have to twirl an advertising sign on a street corner a long time to buy it. In terms of Defense, there is less of an industrial base to manufacture key systems needed to protect American interests. America First I believe is a misnomer, Trump I believe seeks a more equitable playing field whereby American companies who wish to export don't face higher tariffs than the tariffs importers face when selling goods in the US.
  • Vishwas on July 10 2018 said:
    Wonder how it will hurt US? Oil is in universal demand. If not China, the oil will be sold to some other country. It's not like manufacturing where the demand is elastic and sensitive to price. But this move will make Iran sanctions a mockery. Iran will be too happy to sell oil to China even at a discount. China alone can buy its entire crude production. @ $10 discount, China is benefited by $7 billion for a year.
  • George Chakko on July 10 2018 said:
    Economically speaking, the U.S. is not the world’s leading oil economy even if its Big Oil companies are world’s largest. That means the U.S simply cannot control or dictate oil supply even if it surreptitiously tries to dominate the in-out market. Since China and Russia has unpegged oil trade from USD the US economy faces the fate of economic decline; overprinted dollars fated downslide to disaster. On the other hand, the oil consumers’ cartel now emerging wherein the major consumers outnumber the U.S., will also limit OPEC’s sales potential. So the U.S. attempt to lance Iran oil boycott to please AIPAC is contradiction in survival terms. The one major chance for the U.S. which Trump stupidly ignores and detests is the alternative energy technologies, where the U.S. companies are in top bracket. If Trump would only use this potential to encourage innovate substantially this energy market, he could be a true energy game changer matador. Most unfortunately, he is on the reverse side of this compass.

    George Chakko, former U.N. correspondent and writer on OPEC issues, now retiree in Vienna, Austria.

    Vienna, 10/07/2018 18:02 hrs CET

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