Adedapo Adesanya
By Adedapo Adesanya
An escalating trade war between the world’s two largest economies is negatively impacting the outlook for U.S. crude shipments, energy analysts have warned, amid fears that China could soon dramatically reduce its intake of American oil.
Oil prices have since pared some of their recent loss. International benchmark Brent blend traded at $59.75 on Monday (9PM Nigerian Time), up around 1.89 percent while U.S. West Texas Intermediate (WTI) Crude stood at $56. 13, recording a 2.41 percent increase.
Trade tensions between Washington and Beijing prompted some external observers to warn the outlook for China-bound U.S. crude shipments was firmly skewed to the downside.
“Casting another dark cloud over the outlook for U.S. crude shipments is the ongoing U.S.-China trade impasse,” Stephen Brennock, oil analyst at PVM Oil Associates, said in a research note.
It was around this time last year that China emerged as the biggest buyer of U.S. crude, Brennock said, but Chinese buyers were now seen as a “virtual shoo-in” to halt their intake of American oil.
He explained that while losing what was once your biggest customer could hardly be conducive to sustained growth, any drop-off in Chinese purchases might be offset by an increase in exports to other consumers.
“All things considered, the U.S. crude-export machine may struggle to maintain its record-breaking run,” Brennock said.
At the start of August, President Donald Trump announced the White House would impose additional 10% tariffs on $300 billion worth of Chinese imports from September 1.
In response, China let its yuan weaken below the key 7-per-dollar level for the first time in more than a decade. Trump appeared to escalate tensions even further by declaring China as a currency manipulator.
The tit-for-tat dispute sent oil prices tumbling, with crude futures dropping to a seven-month low at one stage.
The last loading of U.S. crude to leave the Gulf of Mexico declaring for China left on August 6, Smith said, citing data sourced by ClipperData. He explained it was important to note that a lag of more than one week between loadings was “not unusual.”
China, the world’s largest oil buyer, was one of the leading destinations of U.S. crude throughout the first half of last year — in what had been a mutually beneficial energy relationship with the U.S., the world’s biggest crude producer.
However, Beijing’s U.S. crude imports plummeted almost immediately after the trade war talk started, with flows completely drying up at the turn of the year as the situation deteriorated.
