China snubs Trump on Iran, halts U.S. oil buys

NEW YORK/ HOUSTON • Rising trade tensions between China and the U.S. may soon affect global oil flows.

China’s largest refiner, Sinopec, will delay making any purchases of U.S. oil for September amid concern that the Asian giant will slap tariffs on American crude, making imports more expensive, according to a person familiar with the matter. Beijing declined to stop imports from Iran, dealing a blow to U.S. efforts to isolate the Islamic Republic, though it agreed not to increase shipments, according to officials familiar with the negotiations.

Petroleum was left off the list of products on which Beijing said Friday it plans to levy duties of five per cent to 25 per cent if the Trump administration enacts threatened tariffs. The world’s biggest oil importer took a record volume from the U.S. in June, increasing the potential hit to American producers if China does enact tariffs.

The Trump administration has warned that even allies would face sanctions if they didn’t show “significant” progress in reducing Iranian oil purchases by Nov. 4, ruling out broad exemptions or waivers.

The Chinese state-run firm is waiting until it is clear when or if China’s 25-percent tariff threat on U.S. crude imports might begin, the person said. Friday’s announcement of additional tariffs on liquefied natural gas and other products comes as President Trump has directed U.S. Trade Representative Robert Lighthizer to consider increasing proposed tariffs on US$200 billion in Chinese goods to 25 per cent from 10 per cent.

Sinopec had already been reducing its U.S. oil purchases, mainly because the discount for West Texas Intermediate crude against international marker Brent had narrowed. In July, the company bought four supertanker loads, compared with six to seven in June. The staterun firm didn’t purchase any U.S. crude for August.

India could step in to buy some of the displaced oil.

“With China out of the picture, India could take another few hundred thousand barrels a day of U.S oil,” Matt Smith of ClipperData said by phone. The South Asian country is already starting to take more U.S. crude and volumes will average 200,000 barrels a day in July and August, he said.