China is raising its purchases of US oil in an effort to repair the trade relationship between the two countries.
In July, China imported 867,000 bpd of US crude oil, compared to June’s 143,000 bpd. China restarted to import US crude in May, following the waivers from Beijing of the 5 tariffs and the slump in oil prices. In the first seven months of this year, China bought USD1.3 billion worth of US crude.
In September, China’s US crude buyings could reach a new record high of roughly 900,000 bpd, based on ship tracking data.
China needs to stay on the Trump administration’s good side ahead of the US election in November. Likely, China knows that the trade issue with Trump will only intensify if the president wins a second term.
Under the Phase 1 US-China trade pact, China should buy USD25 billion of energy products from the US in 2020. Clearly, the country would not be able to meet the overly-ambitious target, therefore, the easiest way for China to reduce its trade imbalance with the US and get near its phase one energy target is to buy large volumes of US crude.
The decision could also increase the dollar value of Chinese imports in ways that other US energy products cannot.
For most Chinese refiners, buying US crude does not always be the most rational option. However, many could not disobey the country’s directive.
Robust reading could not be seen in the US liquefied natural gas (LNG). China’s LNG imports from the US are still much lower than Washington’s target at only 900,000 tons over the first half of 2020 or 2.4% of China’s total. In the January-July period, China only imported USD300 million worth of US LNG.
The low number was attributed to the weak domestic demand in China due to the coronavirus outbreak, and ample supply.
