China Energy Trade Lags Despite Crude Gains

Column: China’s Record U.S. Crude Imports in July Underscores Trade Deal Failure (Reuters)
Clyde Russell (June 25): A record amount of crude oil is heading from the United States to China next month, but rather than signalling that the trade deal between the two countries is working, it serves to underscore just how far Beijing is from meeting its commitments. A total of 31.02 million barrels of crude on 26 vessels is due to arrive in China from the United States in July, according to data compiled by Refinitiv. This equates to about 1 million bpd and is more than double the previous best month of 466,000 bpd in June 2018. Assume a best case scenario that China’s imports of U.S. crude reach a “new normal” of around 1 million bpd, and furthermore assume that prices average $40 a barrel for the foreseeable future. This means that if China imported 1 million bpd from the United States from July to Dec. it would cost about $7.36 billion. That may sound impressive, but is not even enough to match the 2017 baseline of China’s energy imports from the United States, far less the agreed increase in terms of the Phase 1 deal. And the likelihood of China continuing to import at the pace forecast for July already seems remote, with August arrivals so far slated at just 7.04 million barrels, according to Refinitiv… Can coal and LNG help make up some of the numbers? The short answer is no and the outlook is equally bleak… There was a little flurry of U.S. LNG cargoes arriving in China in April and May, when 10 vessels carrying 693k tons of LNG discharged cargoes. But this has dwindled to two ships in June and one booked for July, and nothing on the horizon beyond that… Overall, China appears to have made very little effort to meet its energy purchase commitments under the deal with the United States. Link to Content

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