Daily Management Review

Chinese buyers refusing to buy the US oil


10/09/2018


Although China imposed duties on almost all US imports in response to Washington’s actions, American oil was not subject to restrictions. But it seems that market participants have themselves decided to refrain from purchasing oil for now.



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US crude shipments to China “stopped completely,” said Xie Chunlin, president of China Merchants Energy Shipping on the sidelines of the international shipping forum in Hong Kong, on Wednesday. This was reported by Reuters. “We [China Merchants Energy Shipping] are one of the main carriers of crude oil from the United States to China. Before [trade war], we had a good business, but now it has completely stopped,” the agency quoted him.

His words are supported by ship motion data collected by Refinitiv Eikon (Refinitiv is a new name for the former specialized financial information division of Thomson Reuters, 55% shares of which were acquired by the Blackstone direct investment fund this year). In September, oil supplies from the USA to China amounted to only 0.6 million barrels against 9.7 million a month earlier and 13.9 million in May (this month was a record in terms of supply).

Until recently, American oil supplies to China were even more significant than a year earlier. The United States began selling oil to China only in 2016, and in 2017 the growth amounted to 923.4%. As a result, China ranked 2nd among American oil buyers after Canada, acquiring about 20% of US exports, and the volume of purchases over the year exceeded 80 million barrels. In the first nine months of 2018, the volume amounted to 77 million barrels, Refinitiv Eikon reports.

Yet, US shipments account for only 3% for China. Purchases from the same Iran, whose exports are now falling due to sanctions imposed by the United States, reached a record 806,000 barrels a day in July, ING said; this is 25 million barrels per month. Yet, China has reduced purchases of Iranian oil in the last couple of months, buying about 15 million barrels in September (at least since January). “There have been media reports that the Chinese Sinopec will halve the load this month,” wrote ING analysts on Wednesday, “as a result of pressure from the United States.” However, we continue to adhere to the opinion that China will at least try to maintain the level of purchases, since Iranian oil sold at a discount is too tasty. ”

Meanwhile, despite the absence of American oil in the list of goods for which Beijing introduced duties, Chinese companies have recently ceased to make new orders for it, Reuters reports. “Unfortunately, it happened - the trade war between the United States and China. For the shipping business, of course, this is bad,” said Xie from China Merchants Energy Shipping.

source: reuters.com






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