US-China trade war could get India new oil suppliers from US: report

07 Jul 2018


India is likely to benefit from increased supplies of crude oil from the United States as US oil producers look for new markets as they brace for a trade war with China that could curb US shipments, says a report.

Chinese refiners were the top buyers of American crude oil in May, and have been regular importers since the US revived domestic output and exports in recent years. But sales may slow amid a growing trade war between Beijing and the Trump administration.
“If China imposes tariffs, their refineries won’t buy US crude since it would cost more,” Reuters quoted Sandy Fielden, director of research for commodities and energy at Morningstar Inc, as saying over telephone.
In that case, US sellers would have to find alternative buyers and the best option then is more shipments to India, which already has been buying more US crude, the researcher says.
India imported 4.7 million barrels oil from the US, which is about nine times more than it imported from US in April and the most of any month based on US government data going back to 2015.
If Beijing also imposes tariffs on US crude, it could put downward pressure on the price of benchmark US crude, the West Texas Intermediate, and may weaken its spread to Brent oil, the global market standard. That could lure India to buy more US crude, Fielden was quoted as saying.
Most Indian refineries are designed to process heavy, high-sulphur Iranian crude while bulk of the growth in American supply has been in light, low-sulphur oil produced in shale developments.
“Shale crude is not an alternative to Iranian crude,” Fielden said. “Indian refiners can’t absorb all the US oil that was going to China. They can import more, but can they process it?”
Although the current list of products caught in the tariff war does not include energy-related products, oil traders continue to monitor the events because Beijing has threatened a 25-per cent tariff on US crude imports.
US West Texas Intermediate and international bench-mark Brent crude oil futures are trading mixed in limited action.
At 0734 GMT, August WTI crude oil was trading at $73.02, up 0.07 or +0.10 per cent and September Brent crude oil is at $77.17, down $0.22 or -0.28 per cent.
On Thursday, the US Energy Administration (EIA) announced that U.S. crude inventories had risen 1.2 million barrels in the week to June 29, to 417.88 million barrels.
This news was generally thought of as bearish because traders had been pricing-in a 4.4 million barrel decline.
Additionally, gasoline stockpiles fell by 1.5 million barrels for the week, but distillate stockpiles were up by 100,000 barrels for the week, according to the EIA. Traders were looking for a decrease of 2.5 million barrels for gasoline, and 250,000 barrels for distillate stocks.

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