China es­ca­lates im­ports of crude from United States

China Daily (Hong Kong) - - BUSINESS - By ZHENG XIN zhengxin@chi­

An­a­lysts said on Tues­day they be­lieve a dra­matic surge in im­ports of US petroleum prod­ucts into China in the cur­rent year is a win-win for the world’s big­gest trad­ing part­ners.

China im­ported an av­er­age of 100,000 bar­rels of crude per day from the United States dur­ing the first five months of 2017, 10 times the level for the same pe­riod last year, ac­cord­ing to of­fi­cial cus­toms data.

The Gen­eral Ad­min­is­tra­tion of Cus­toms fig­ures, re­leased ear­lier this month, in­di­cate the up­ward trend is also pick­ing up speed, with im­ports surg­ing to more than 180,000 bar­rels per day in April and May.

“China has long de­pended on fuel im­ports and the cheaper en­ergy price, in ad­di­tion to the mas­sive amount of US oil, has def­i­nitely con­trib­uted to the in­crease in im­ports,” said Li Li, en­ergy re­search di­rec­tor at ICIS China, a con­sult­ing com­pany that pro­vides anal­y­sis of the en­ergy mar­ket here.

“The US’ in­creas­ing share of China’s en­ergy im­ports will also en­sure the coun­try’s en­ergy se­cu­rity, as China has been ex­plor­ing dif­fer­ent crude oil im­port chan­nels,” Li added.

US Cen­sus Bu­reau data on in­ter­na­tional trade show that the com­bined value of US crude oil, gas and re­fined petroleum ex­ported to China in the first five months of 2017 to­taled over $2.76 bil­lion.

China pur­chased $1.6 bil­lion of US crude, rep­re­sent­ing 21 per­cent of US global crude oil ex­ports from Jan­uary through to May.

The US lifted a 40-year old ban on oil ex­ports two years ago, as its pro­duc­tion lev­els rose to their high­est in decades, boosted by surg­ing new shale oil and gas out­put.

Wang Lu, an Asia-Pa­cific oil and gas an­a­lyst at Bloomberg In­tel­li­gence, said US oil ex­ports could also lower OPEC’s global mar­ket share of oil pro­duc­tion and could un­der­mine the pro­ducer group’s will­ing­ness to com­ply with their agreed out­put re­duc­tions.

China be­came the big­gest pur­chase of US crude oil in Fe­bru­ary, over­tak­ing Canada, against the back­drop of OPEC’s scal­ing back of its pro­duc­tion.

“While the out­put-cut deal has been ex­tended to March 2018, whether OPEC will com­ply with that un­der­tak­ing is un­cer­tain,” Wang said.

Crude oil ex­ports from US to China surged to 759,000 met­ric tons in May, and its mar­ket share as a per­cent­age of China’s to­tal oil im­ports rose to 2 per­cent from 0.1 per­cent a year ago, while that of the Mid­dle East fell to 41.6 per­cent from 46.7 per­cent, Wang said.

China’s big­gest oil and gas pro­ducer, China Na­tional Petroleum Corp, said ear­lier it would im­port more crude oil and nat­u­ral gas from the US, while also con­sid­er­ing in­volve­ment in the coun­try’s grow­ing liq­ue­fied nat­u­ral gas ex­port in­dus­try.

CNPC chair­man Wang Yilin said his com­pany was set­ting its sights on hav­ing a grow­ing re­liance on US en­ergy im­ports, on the side­lines of the Belt and Road Fo­rum in Bei­jing.

“The US has very rich oil and gas re­sources, and as China pur­sues a di­ver­si­fi­ca­tion of its crude sup­plies the US will of course be one of the sources,” he said.

“We will (also) con­sider ex­plor­ing co­op­er­a­tion in ar­eas such as jointly de­vel­op­ing liq­ue­fied nat­u­ral gas fa­cil­i­ties and gas trans­port,” he added.

Xi­a­men Univer­sity en­ergy ex­pert Lin Bo­qiang, who has ad­vised Bei­jing on oil pol­icy, said that China should con­sider buy­ing oil from places other than the Mid­dle East.

The glut of US crude also made it cheaper than oil from the Mid­dle East.

“If there’s an op­por­tu­nity to buy oil from some­where else, we should,” he said.

“The pre­con­di­tion is that it must be eco­nom­i­cal.”

US crude prices were cur­rently rel­a­tively low, while the move to in­crease oil ex­ports is also in ac­cor­dance with Wash­ing­ton’s tar­get to re­duce the trade deficit be­tween China and the US, Lin said.

US En­ergy Sec­re­tary Rick Perry called for more en­ergy co­op­er­a­tion with China dur­ing a visit to Bei­jing in June.

Ex­pand­ing crude ex­ports also means more jobs in the US, said Ray Per­ry­man, pres­i­dent of the con­sult­ing firm Per­ry­man Group. He was quoted by the New York Times es­ti­mat­ing that the ex­panded crude ex­ports could add over 480,000 jobs na­tion­ally over the next cou­ple of decades, nearly 60 per­cent of which will be in Texas, even if oil prices re­main mod­er­ate to low.

Xi­a­men Univer­sity’s Lin said the US cur­rently ac­counts for a small per­cent­age of China’s oil im­ports, with Rus­sia, Saudi Ara­bia and An­gola still its top crude sup­pli­ers.

How­ever, as China keeps seek­ing to di­ver­sify its oil and gas sup­pli­ers — with its own oil fields be­com­ing less pro­duc­tive and geopo­lit­i­cal wor­ries pos­ing a threat to dis­rupt sup­plies from the Mid­dle East — he was op­ti­mistic about fu­ture US-China oil co­op­er­a­tion.

China has long de­pended on fuel im­ports and the cheaper en­ergy price ...” Li Li, en­ergy re­search di­rec­tor at ICIS China

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