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The biggest refiner in China and in Asia, Sinopec, plans to apply for a tariff exemption with the Chinese government for its imports of U.S. crude oil, Reuters reported on Monday, citing sources familiar with the issue.
On Friday, China and the United States traded tariff and counter-tariff announcements, with Beijing saying first that China would place tariffs on a range of U.S. products worth US$75 billion, including crude oil, in two batches starting on September 1 and on December 15. U.S. President Donald Trump retaliated with announcements of higher tariffs on Chinese products.
The end of the truce in the U.S.-China trade war and the highly unpredictable nature of the next moves in the trade spat have made traders in China even more reluctant to buy U.S. crude oil despite its favorable economics, Chinese traders told S&P Global Platts earlier this month.
Chinese customers are not touching spot cargoes and not even thinking of long-term agreements, traders told S&P Global Platts. Some Chinese companies, however, do have such long-term deals, like Unipec, the trading unit of Sinopec.
Amid the trade war, Sinopec is now drafting contingency plans after China’s announcement that it would start imposing a 5-percent tariff on U.S. crude effective September 1. According to Reuters’ sources, this tariff would make U.S. crude $3 a barrel more expensive for Chinese buyers.
Sinopec plans to apply for a kind of tax exemption for its imports of U.S. crude oil, sources told Reuters. The Chinese refiner is also considering storing oil from the U.S. in bonded storage, such that hasn’t cleared customs in China yet, or sending it to other destinations, according to one of the sources.
In September and October, Sinopec is expected to receive a total of 8 million barrels of U.S. crude oil, Reuters reports, citing data from Refinitiv and Kpler.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.