US exports crude oil to China

America is exporting to China for the first time in eight years, with big implications for bilateral relations and the global market

PUBLISHED : Thursday, 18 April, 2013, 12:00am
UPDATED : Thursday, 18 April, 2013, 5:54am


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The US has started exporting crude oil to China for the first time since 2005, which analysts say gives Washington additional leverage in Sino-US relations and has major implications for the global oil market.

In January, the US exported 9,000 barrels of crude per day to China, the highest in at least 13 years, according to the US Energy Information Administration (EIA).

China's reliance on oil will increase unless it can find different energy sources. With its own oil production rising, the US can cut down on oil imports

"China will increase its oil imports in the coming years," said Adrian Loh, an analyst at Daiwa Capital Markets in Singapore.

"If US oil exports to China increase, the impact on Sino-US relations will be felt," said Li Xin, an analyst at Masterlink Securities in Shanghai.

"For China, the room for ramping up oil production is limited. China's reliance on oil will increase unless it can find different energy sources. With its own oil production rising, the US can cut down on oil imports," said Lawrence Lau, an analyst at Bank of China.

Later this year, US crude oil production will surpass its oil imports for the first time since February 1995, the EIA predicts. The average US energy use per person will drop from 312 million British thermal units (Btu) in 2011 to below 270 million Btu in 2034, a level not seen since 1963.

In December, China overtook the US as the world's biggest net importer of oil. US net oil imports fell to 5.98 million barrels per day that month, the EIA said. China's net oil imports, meanwhile, rose to 6.12 million barrels per day, according to China Customs.

"The biggest impact will be on the global energy market," said Li. As US dependence on oil imports decreases, the importance of the Middle East as an oil producer will diminish, Li predicted.

Loh said: "If the US is producing and exporting more oil, [the oil producers' cartel] Opec's ability to control oil prices will diminish. Everything else being equal, oil prices should stabilise at a lower level."

"China's oil import demand is growing at half a million barrels per day each year. China will increasingly be deeply dependent on the stability of the global oil market," said Mikkal Herberg, a research director at the US-based National Bureau of Asian Research, during his testimony before the US-China Economic and Security Review Commission.

China's growing dependence on oil and liquefied natural gas flowing through the Indian Ocean, Malacca Straits and South China Sea is a key driver of the navy's modernisation towards "blue water" capabilities, "which is setting off alarm bells across the region and contributing to a regional naval arms race", said Herberg.