Asian oil refiners are racing to secure crude supplies in anticipation of an escalating trade war between the United States and China, and as Washington plans tough sanctions against Iran aimed at shutting the country out of oil markets, reports Reuters.
As part of a wave of retaliation for Friday's US tariffs, China has threatened a 25 per cent duty on imports of US crude. Meanwhile, Washington's new sanctions against Tehran are due to kick in from November.
That double whammy is prompting Asian refiners to move swiftly, with South Korea leading the way. Under pressure from Washington, Seoul has halted all orders of Iranian oil, according to sources, even as it braces from spillover effects from the US-China tit-for-tat on trade.
"As South Korea's economy heavily relies on trade, it won't be good for South Korea if the global economic slowdown happens because of a trade dispute between U.S and China," said Lee Dal-seok, senior researcher at the Korea Energy Economic Institute (KEEI).
In China, state media slammed US President Donald Trump's government as a "gang of hoodlums", with officials vowing retaliation. Standing in the line of fire are US crude supplies to China, which have surged from virtually zero before 2017 to 400,000 barrels per day (bpd) in July.
Although just 5.0 per cent of China's overall crude imports, these supplies are worth $1.0 billion a month at current prices - a figure that seems certain to fall should a duty be implemented.
US crude oil is not on the list of 545 products the Chinese government has said it would immediately retaliate with in response to American duties.
However, crude oil is listed as a US product that will receive an import tariff at an unspecified later date.
While no date has been set, industry participants expect the tariff to be levied.
"The Chinese have to do the tit-for-tat, they have to retaliate," said John Driscoll, director of consultancy JTD Energy, adding that cutting US crude imports was a means "of retaliating (against) the US in a very substantial way".
In an early sign of future times, an executive from China's Dongming Petrochemical Group, an independent refiner from Shandong province, said his refinery had already canceled US crude orders.
"We expect the Chinese government to impose tariffs on (US) crude," the executive said, declining to be named as he was not authorized to speak to media. "We will switch to either Middle East or West African supplies," he said.
JTD Energy's Driscoll said China may even replace American oil with crude from Iran. "They (Chinese importers) are not going to be intimidated, or swayed by US sanctions," he said.
In Japan, Asia's third-biggest importer of crude, the oil industry has yet to react publicly to Friday's news. The Petroleum Association of Japan previously warned refiners will have to stop loading Iranian crude oil from October if Tokyo doesn't win an exemption on US-Iran sanctions.