By Irina Slav
China has opened for applications for tariff exemptions on a number of U.S. products and commodities including crude oil and liquefied natural gas, Reuters reported today.
Tariffs were blamed for the slump in U.S. oil and LNG exports to China, which is one of the biggest importers for both commodities. They also interfered with U.S. LNG companies’ plans for new export capacity.
After the signing of the Phase 1 trade deal between Washington and Beijing, many hoped that this would restore exports and even boost them significantly. The terms of the deal include the addition of U.S. energy exports worth some $18.5 billion this year and another $33.9 billion in 2021. The additional exports span the whole spectrum of fossil fuels and their derivatives, from crude oil and liquefied natural gas to various fuels as well as coke and coal.
However, the coronavirus outbreak has seriously affected China’s demand for oil and even LNG with virtually every industry in the country suffering the fallout from the large-scale quarantines and other travel bans.
State refiners have cut their processing rates by a tenth this month and will be cutting additionally in March, according to OilX. The combined cut for PetroChina, Sinopec, and CNOOC for February came in at around 940,000 bpd, according to a Reuters report. Private refiners cut even more, with OilX calculating the cut at 25 percent.
According to the American Petroleum Institute, however, even if there was strong demand for U.S. oil, the producers might not be able to satisfy it in accordance with the Phase 1 deal. Bloomberg earlier this month reported that the industry group had warned Washington that oil production capacity would need to be stretched quite a bit to fulfill the terms of the trade deal. Even so, the removal of tariffs would be a step in the right direction for U.S. oil and LNG producers as Chinese demand for their product will sooner or later recover.
By Irina Slav for Oilprice.com