China Ramps Up U.S. Oil Purchases Before Trade Deal Review

(Bloomberg) — China, the world’s biggest oil importer, ramped up purchases of American crude in advance of a review of the trade deal between the two economic powerhouses.

As much as 14 million barrels — or seven super-class tankers full — of U.S. oil will be loaded next month for delivery to China, according to estimates by Vortexa Ltd. based on provisional tanker bookings. Those shipments would more than double the volumes set for August.

In the phase-one trade deal signed in January, China pledged to increase purchases of U.S. energy products. Talks to review the accord, which were originally planned for last weekend, have been delayed indefinitely, however, amid deteriorating relations between the two countries.

Chinese imports of U.S. goods in the first six months of the year reached only about 23% of the 2020 target under the trade agreement, according to Bloomberg calculations based on data from General Administration of Customs. The nation’s refineries have been cranking up run rates as the economy emerges from the pandemic-induced slump, which may be another reason for the increase in buying.

“The rise in U.S. crude purchases is likely politically driven,” said Serena Huang, a senior analyst at Vortexa, a market analytics firm. “China is still sitting on large stockpiles of oil, and current U.S. crude prices are not much more favorable than their Middle East competitors.”

Oil-refining heavyweights PetroChina Co. and Sinopec chartered more than 40% of the China-bound supertankers set for September loading as of Aug. 17, Vortexa’s data show. Grades such as WTI Midland and Mars were among the types of American oil purchased by China, but they weren’t always cheaper than alternative feedstock from other regions, according to traders.

A Beijing-based Sinopec official at the company’s press office and an official at China National Petroleum Corp., parent company of PetroChina, declined to comment.

China bought a monthly average of 568,500 tons, or 4.2 million barrels, of U.S. oil in May and June, General Administration of China Customs data show. The country imported no American oil in the previous five months as relations between the two countries deteriorated amid the coronavirus pandemic.

China’s energy demand has rebounded in line with an uptick in its economy, said Rajiv Biswas, Asia-Pacific chief economist at IHS Markit.

“These new orders for U.S. crude will help to improve China’s overall progress toward the U.S.-China phase one trade deal targets,” he said.

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