Nifty99000 100%

Sensex99000 100%

Exclusive

Oil Keeps US And China On The Boil

Author: Arpit Chandna/Wednesday, August 21, 2019/Categories: Exclusive

Rate this article:
3.0
Oil Keeps US And China On The Boil

The ongoing trade war between the US and China seems to be stretching beyond trade. Undoubtedly, America wants to impose its hegemony on global trade network but China is playing the big game for global oil market control. After Beijing's recent collaboration from multiple countries in One Belt & One Road initiative, the Donald Trump dispensation seems to be worried about the growing Chinese presence in most of the strategic trade gateways.

The trade conflict between the two global economic powers has intensified after the US imposed new tariffs of 10% on $300 billion worth of Chinese imports effective from September 1.

White house economic adviser Kudlow said trade deputies from both the nations will sit for a dialogue in the next 10 days to iron out differences. The global financial markets and energy sector are rattled over the tensions between the US and China.

In the energy sector, strategic crude oil trade partners Saudi Arabia and the US parted their ways. The US, a major buyer of Saudi Arabia oil, lowered its dependence by utilizing the shale oil boom in its own country. In response to the reimposition of the US sanctions on Iranian oil sales, Saudi Arabia has decided to export more crude oil to China and reduce export volumes to the US.

According to data by the US Energy information Administration, the US imports from Saudi Arabia declined by 32% in just two years and 20% lower on YOY basis. In July, the average US crude oil import from Saudi Arabia stood at 6.9 million bpd, 6% lower than June import volumes.

In its latest monthly report, Saudi Arabia had mentioned about replacing Russia as the top crude oil supplier to China in July with the exports volume of 1.8 million bpd which is 27% higher than 1.1 million bpd in June.

The lower exports to the US seems to have little impact. Saudi Aramco, the kingdom's state-owned oil company, owns Motiva refinery in Port Arthur in Texas and all Saudi exports are directed to this facility. Saudi is directing its crude oil exports to strengthen its relationship with China and also expand its market share.

China has managed to import crude oil from Iran by offloading some of the portion into bonded storage tanks. China is insulating itself from the US sanctions as the oil in bonded storage are yet to clear customs duties thereby suggesting officially zero import of Iranian oil. As per Refinitive Oil Research, around 4.4 million to 11 million barrels of Iranian crude were discharged into China during July. If China starts buying stored Iranian oil and sell it to its domestic buyers, an excessive availability of oil could pressurize the global crude prices downward. If the trade war gets intensified, China could buy Iranian crude oil ignoring the US sanctions. Iran and Saudi Arabia could also benefit from such a move. (The author is a fundamental research analyst at Karvy Comtrade Limited)

Print

Number of views (505)/Comments (0)

Leave a comment

Name:
Email:
Comment:
Add comment

Name:
Email:
Subject:
Message:
x

Videos

Ask the Finapolis.

I'm not a robot
 
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
 
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above

Categories

Disclaimer

The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free