1124 GMT July 21, 2018
As part of a wave of retaliation for Friday’s US tariffs, China has threatened a 25 percent duty on imports of US crude. Meanwhile, Washington’s new sanctions against Tehran are due to kick in from November.
In China, state media slammed US President Donald Trump’s government as a “gang of hoodlums”, with officials vowing retaliation. Standing in the line of fire are US crude supplies to China, which have surged from virtually zero before 2017 to 400,000 barrels per day (bpd) in July.
In an early sign of future times, an executive from China’s Dongming Petrochemical Group, an independent refiner from Shandong Province, said his refinery had already cancelled US crude orders, Reuters reported.
“We expect the Chinese government to impose tariffs on (US) crude,” the executive said, declining to be named as he was not authorized to speak to media. “We will switch to either Middle East or West African supplies,” he said.
JTD Energy’s Driscoll said China may even replace American oil with crude from Iran. “They (Chinese importers) are not going to be intimidated, or swayed by US sanctions,” he said.
Although just 5 percent of China’s overall crude imports, these supplies are worth $1 billion a month at current prices - a figure that seems certain to fall should a duty be implemented.
US crude oil is not on the list of 545 products the Chinese government has said it would immediately retaliate with in response to American duties.
However, crude oil is listed as a US product that will receive an import tariff at an unspecified later date.
While no date has been set, industry participants expect the tariff to be levied.
“The Chinese have to do the tit-for-tat, they have to retaliate,” said John Driscoll, director of consultancy JTD Energy, adding that cutting US crude imports was a means “of retaliating (against) the US in a very substantial way”.
Oil consultancy FGE agrees, noting that China is unlikely to heed President Trump’s warning to stop buying oil from Iran.