China’s 2018 crude oil import to rise by 80 per cent. Can it close its US trade gap or assuage Trump?
The world’s second-largest oil refiner, already Asia’s biggest customer of US crude exports, could raise the import bill by buying 10 million tonnes of US crude oil in 2018.
China Petrochemical Corp, the world’s second largest oil refiner, expects to see its crude oil import from the US jump by more than 80 per cent this year, which could help address Washington’s complaints of a widening trade deficit in favour of China.
Import of US crude by the state-owned parent company of listed China Petroleum & Chemical, popularly known as Sinopec, could top 10 million tonnes this year, it said in a statement on Monday.
Through its trading arm Unipec, the oil giant last year bought 5.57 million tonnes of US crude, accounting for 10 per cent of that country’s total crude exports and making it Asia-Pacific’s largest customer, it said.
“China Petrochemical broke ground by loading its maiden batch of US crude in March 2016 … so far more than 10 of the company’s refineries are handling US crude,” it said.
“This has had a positive impact on China’s crude import sources diversification and [replacement of supply by more] economic alternatives.”
The energy giant said the development highlights a growing relationship between China and the US, on oil at least.
China overtook the US as the world’s largest crude importer last year, and the US is forecast by the US Energy Information Administration (EIA) to account for 80 per cent of the world’s additional crude supply in the medium to long term, it added.
Rising energy imports from the US remains one of the few bright spots in tense Sino-US trade relations, with the Trump administration blaming the growing deficit in favour of China on the latter’s “unfair” trade practices.
The US last month slapped a 30 per cent tariff on all imports of solar panels and washing machines, for instance. China is the world’s largest producer of solar panels, accounting for 71 per cent of global output, according to consultancy, Asia Europe Clean Energy (Solar) Advisory.
US President Donald Trump earlier this month said he was considering tariffs and quotas to protect American industry from the “dumping” of aluminium and steel products made overseas in the country.
China’s trade surplus over the US rose 8.6 per cent to US$275.8 billion last year from 2016, or about 65 per cent of the former’s total global trade surplus, according to the Chinese General Administration of Customs.
The EIA has projected US crude production to surge 13.5 per cent this year to 10.59 million barrels a day, helped by the technology-enabled rising cost competitiveness of US shale oil production, and output cutbacks by the Saudi Arabia-led cartel, Organisation of the Petroleum Exporting Countries (OPEC), to prop up prices ahead of the planned stock market listing of state oil firm Saudi Aramco.
China is not alone among major Asian importers such as India and Japan in importing more crude from North America, although it posted the steepest growth (12-fold) in crude imports from the region, according to commodities information provider S&P Global Platts.
China last year also imported 22 per cent more crude from Africa, 13 per cent more from South America and 14 per cent more from Russia, while Saudi Arabia’s share of China’s total crude import fell to 12 per cent from 13.4 per cent in 2016.
Historically low freight rates of very large crude carriers (VLCCs) amid a glut of available vessels also bolstered the attractiveness of US crude.
Platts’ analysts expect the trend to continue this year as even more surplus VLCCs become available across the globe.