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US may become majority source for China’s crude imports after trade deal

The first phase trade deal between the US and China will need China to heavily expand purchases of US crude oil, and that could mean potentially over 60% of China’s additional crude imports in 2020 will be grabbed by the US, according to ICIS analysts.

Under the phase one deal signed on Wednesday, China will increase imports of US energy products by $52.4bn in two years, with around 35% ($18.5bn) for 2020 and some 65% ($33.9bn) for 2021.

That gives energy a share of 26% in the total $200bn of additional imports China has committed to purchase.

Based on customs data, crude accounts for some 60% of the four types of energy products (liquefied natural gas, crude, refined products and coal) China imported from the US in 2018.

That said, the burden on China to increase US crude imports to fulfill the trade agreement is extremely large.

“China may need to import 25m tonnes more US oil in 2020 and 46m tonnes more in 2021,” according to Li Li, head of crude analytics with ICIS.

According to ICIS analytical data, China’s crude imports are expected to increase by 40m tonnes in 2020, which means that the US will take the lion’s share of this increase which would otherwise go to different suppliers, particularly the Middle East countries.

“That will reshuffle China’s crude import landscape,” Li said.

For downstream LPG, China basically shunned US imports in 2019 because of the additional tariffs.

For 2020, China’s imports of LPG from the US are expected to surge sharply to previously levels at around 20% if the punitive tariffs are cancelled in January or February, according to Yan Wang, senior LPG analyst with ICIS.

Share of US supply in China’s total imports

Crude oil LPG
2017 2.0% 19.2%
2018 2.7% 8.5%
Jan-Nov 2019 1.4% 0.01%
2020 estimate 17% 20%

Source: China Customs, ICIS

Source: ICIS by Fanny Zhang (https://www.icis.com/explore/resources/news/2020/01/16/10459587/us-may-become-majority-source-for-china-s-crude-imports-after-trade-deal)

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