In January 2018, President Trump imposed US tariffs on a wide range of products, including solar panels and washing machines. He followed that action up in June, when an additional US tariff series rolled out on steel and aluminum. People have been watching with anticipation to see how the world might react, and now the process has begun.
China’s Response to US Tariff
In early August, China’s Unipec – the trading portion of oil giant Sinopec – suspended all crude oil imports from the US. Headquartered in Beijing, Sinopec’s parent company, Sinopec Group, is the largest oil refining, gas and petrochemical conglomerate in the world.
According to a piece that originally ran on Reuters.com, the move was likely designed to help the company avoid the tariff China placed on US-based energy products, though China later made an exemption for crude oil and liquefied natural gas exports. Despite the exemption, crude exports to China have fallen, partly because of US tariff fears and partly because of shrinking discounts on US crude oil.
In a lot of ways, this move was unsurprising. Buyers in China had already slowed purchasing US crude oil because of the escalating trade dispute between the US and China. Energy products will incur a 25% import tax in China in response to the Trump administration’s actions, though officials have not said when those tariffs begin.
The Future of China’s Demand for US Crude Oil
As of now, it is not clear how long this halt will last. However, one source familiar with the matter – who asked to remain anonymous because he was not authorized to speak to the media – said that Unipec has no new bookings of U.S. crude oil until at least October of this year.
A decline in China’s demand for US crude oil could be significant. For perspective, China’s oil imports from the US averaged about 334,880 barrels per day from January to August 2018. By as soon as September, that number could fall to 197,515 barrels per day.
About Matrix Global
Founded in 2014, Matrix Market’s first initiative was the highly successful launch of the world’s first futures contract on crude oil storage capacity, developed jointly by the management of Matrix, the Chicago Mercantile Exchange, and LOOP LLC, the largest privately held crude storage facility in the U.S.