China met only 5% of its energy purchase commitments under the Phase-One trade deal with the US during the first half of 2020. During the period China imported only $1.29 billion worth of crude oil, LNG, met coal, and other energy products, falling short from its $25.3-billion pledge made when both nation’s relationships were already sour.
China’s imports of US crude fell to 45,603 bpd in the first half of 2020 from 85,453 bpd in the same period in 2019. Chinese importers boosted purchases of American oil to roughly 940,000 bpd in July and expected to reach an all-time high of 1.01 million bpd in August. However, squeezed refining margins and swelling stockpiles are expected to slow down the imports. Under the Phase_one deal, China needs to import 1.5 million bpd of US crude this and next year.
During the reporting period, China more than trebled its US LNG import volumes from 878,754 tonnes in the first half of 2019. However, low prices mean that China’s US LNG import only doubled on a value basis. Importing US met coal also faces the same problem stemming from weak energy prices.
According to analysts, China will likely undershoot its full-year goal in the Phase-One deal because its commitments are overly ambitious to begin with. Weak energy prices and demand are also expected to cap China’s appetite to ramp up energy purchases. Moreover, both countries’ relationships are worsening over several issues. Failure to fulfil the Phase-One commitments will likely deteriorate the ties between the world’s two most powerful economies further.
