Asia’s oil refiners rush to deal with US-China trade war and looming tough Iran sanctions

SINGAPORE — Asian oil refiners are racing to secure crude supplies in anticipation of an escalating trade war between the United States and China, and as Washington plans tough sanctions against Iran aimed at shutting the country out of oil markets.

As part of a wave of retaliation for Friday’s US tariffs, China has threatened a 25% duty on imports of US crude. Meanwhile, Washington’s new sanctions against Tehran are due to kick in from November.

That double whammy is prompting Asian refiners to move swiftly, with South Korea leading the way. Under pressure from Washington, Seoul has halted all orders of Iranian oil, according to sources, even as it braces from spillover effects from the US-China tit-for-tat on trade. “As South Korea’s economy heavily relies on trade, it won’t be good for South Korea if the global economic slowdown happens because of a trade dispute between US and China,” said Lee Dal-seok, senior researcher at the Korea Energy Economic Institute (KEEI).

In China, state media slammed US President Donald Trump’s government as a “gang of hoodlums,” with officials vowing retaliation. Standing in the line of fire are US crude supplies to China, which have surged from virtually zero before 2017 to 400,000 barrels per day (bpd) in July.

Although just 5% 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.

US 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 US product that will receive an import tariff at an unspecified later date.

While no date has been set, industry participants expect the tariff to be levied.

“The Chinese have to do the tit-for-tat, they have to retaliate,” said John Driscoll, director of consultancy JTD Energy, adding that cutting US crude imports was a means “of retaliating (against the US in a very substantial way).” —