Oil Refiners in Asia Hurry to Trade With US Due to Expected Trade War
The people in the world of business know about the tariffs that the USA has imposed on china. However, when the news was first announced, nobody anticipated the kind of ramifications that it would start. Because of a seemingly escalating trade war, a lot of Asian refiners are acting double-time.
Not Getting Left Behind
Oil refiners in Asia are hurrying to get crude supplies due to them anticipating an escalating trade war between China and the United States. Washington seems to be planning hard sanctions against Iran, aiming to shut them out of oil markets.
As part of a series of retaliations for U.S. tariffs last Friday, China threatened 25 percent duty on U.S. crude imports. Meanwhile, Washington’s new sanctions on Tehran are about to start this November. That one-two combo is making Asian refiners move swiftly, with South Korea ahead of the pack. Feeling pressure from Washington, Seoul has stopped all Iranian oil orders, according to sources, even as it prepares from spillover effects from the China-US eye-for-an-eye on trade.
According to Lee Dal-seok, who is a senior researcher at the Korea Energy Economic Institute (KEEI), as South Korea’s economy is reliant on trade, it will not be good for the nation if the global economic downtime occurs due to a trade war between China and the US. In China, state media called the President of the United States, Donald Trump’s government as a “gang of hoodlums”, with many officials promising retribution. In their sights are are U.S. crude supplies to China, which have skyrocketed from almost zero before 2017 to 400,000 barrels every day during July.
Watching a Train Wreck As it Happens
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. U.S. 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 U.S. product that will receive an import tariff at an unspecified later date.
The Chinese have to do the tit-for-tat, they have to retaliate, said John Driscoll, director of consultancy JTD Energy, adding that cutting U.S. crude imports was a means of retaliating (against) the U.S. in a very substantial way. 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 canceled U.S. crude orders. We expect the Chinese government to impose tariffs on America’s crude, the executive said, declining to be named as he was not authorized to speak to media. He continued by saying that they will switch to either Middle East or West African supplies.
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 U.S. sanctions,” he said. In Japan, Asia’s third-biggest importer of crude, the oil industry has yet to react publicly to Friday’s news. The Petroleum Association of Japan previously warned refiners will have to stop loading Iranian crude oil from October if Tokyo doesn’t win an exemption on U.S.-Iran sanctions.
Opportunity Amid the Turmoil
If China retaliates with tariffs on U.S. crude, that could improve South Korea’s terms of buying U.S. crude…because the U.S. would need a market to sell to, said the KEEI’s Lee. Highlighting that issue, JTD Energy’s Driscoll said U.S. oil sellers were “already discounting” their crude.
Only time will tell the full ramifications of having the two arguably greatest economies in the world clashing. Experts say that this might just be the beginning, and that worse times are to come. Others have also stated that despite what is currently happening, the effects won’t be that bad because others are willing to do what they can to survive. Despite the alleged trade war that is looming on the horizon, there really is no surefire way to tell what’s in store in the future.
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