SINGAPORE (ICIS)--China will heavily ramp up imports of US crude to start implementing its commitment to the phase one trade deal between the world’s largest two economies that takes effect on Friday, 14 February, according to analysts.
Under the phase one agreement signed on 15 January, China will increase purchases of US goods by $200bn in 2020 and 2021, including manufactured goods, agriculture, energy and services.
The China pledge on US energy products totaled $52.4bn, with $18.5bn in 2020 and $33.9bn in 2021.
“We expect that China’s intake of US crude will reach 400,000 bbl/day this year, from zero in December 2019,” said Li Li, head of crude and refinery analytics with ICIS Analytics.
In a tit-for-tat trade war, China started levying 5% tariffs on US crude from 1 September 2019, resulting in steep falls in its imports of the commodity from the US.
On 6 February, China announced that it would halve tariffs on some US goods from 14 February and cut the rates on crude to 2.5%.
Because of the outbreak of the COVID-19 coronavirus, China’s crude demand is expected to fall by 20% or 1.5m-1.8m bbl/day in the first quarter, according to a former analyst with Sinopec.
That will impose big pressure on China to expand imports of US goods, including crude.
Other oil suppliers, especially countries in the Middle East countries that rely heavily on Chinese markets, will be sacrificed, he said.
The trade deal has not yet attracted much attention from the petrochemical market as participants are largely focusing on resuming business from the virus-disrupted supply chain.
The Chinese mainland has reported over 63,000 infections and more than 1,300 deaths from the epidemic as of Thursday.
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Focus article by Fanny Zhang