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Beijing’s decision to not impose tariffs on U.S. crude oil imports has relieved local state refiners, who have been expanding their purchases from U.S. suppliers, sources from the industry told Reuters.
China last slapped 25-percent import tariffs on U.S. products worth US$16 billion, but stopped short of adding crude oil to this list. The crude oil imports were worth around half of this, based on Sinopec’s forecast of an average daily rate of U.S. oil imports of 300,000 bpd.
One Reuters source says Sinopec, the largest refiner and buyer of U.S. crude in Asia, had lobbied with Beijing to make sure it will not add crude oil to the tariff list.
Also, “The U.S. will be the single largest source of new oil supplies outside OPEC. It’s in China’s interest to diversify supplies,” another source told Reuters.
But some believe that the removal of crude oil from the tariff list is only a delay tactic, and that Beijing will keep the oil card for the future as the trade war shows no signs of approaching any sort of an end.
China could perhaps use oil as a bargaining chip in future negotiations with Washington—especially, Reuters notes, if it loses any amount of Iranian supply as a result of the sanctions. Such a loss may or may not happen: China gave in to a request from Washington to stop increasing its shipments of Iranian oil but said it will not suspend purchases.
The country imports some 650,000 bpd of Iranian oil currently, which is worth US$15 billion annually. State oil majors Sinopec and CNPC have also invested heavily in their own equity production in Iran. But imports of Iranian oil could still be threatened, according to analysts, so China could be taking precautions with the exclusion of oil from tariffs.
Nothing is certain, however. The latest threat from President Trump is to slap tariffs on US$200 million worth of Chinese goods. This move could sap the patience of Beijing and make it add crude oil to the next list of U.S. goods facing tariffs.
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.