China, the world's top oil importer, is set to start 2019 buying little or no crude from the United States despite a three-month truce in a trade scrap between the two nations, with relatively high freight costs and political uncertainty choking demand, reports Reuters.
That muted appetite means the United States, which became the world's top oil producer this year as its shale output hit record levels, will continue to hold only a sliver of China's market even as a wave of new refining capacity starts up there.
It also suggests that China is unlikely to use crude purchases to help plug a widening trade gap with the United States, which remains a core source of tensions between the world's top two economies.
The US trade deficit with Beijing hit a record $43 billion in October as its firms stockpiled inventory from China to avoid higher tariffs that may kick in next year.
"Chinese companies have little incentive to buy US crude due to the wide availability of crude supplies today from Iran and Russia," said Seng Yick Tee, an analyst at Beijing-based consultancy SIA Energy.
"Even though the trade tension between China and the US had been defused recently, the executives from the national oil companies hesitate to procure US crude unless they are told to do so."
China stopped US oil imports in October and November after the trade war intensified. It resumed some imports in December, but purchased just 1 million barrels, a minute portion of the more than 300 million barrels of total imports, Refinitiv data showed.
Chinese refineries that used to purchase US oil regularly said they had not resumed buying due to uncertainty over the outlook for trade relations between Washington and Beijing, as well as rising freight costs and poor profit-margins for refining in the region.
Costs for shipping US crude to Asia on a supertanker are triple those for Middle eastern oil, data on Refinitiv Eikon showed.
A senior official with a state oil refinery said his plant had stopped buying US oil from October and had not booked any cargoes for delivery in the first quarter.
"Because of the great policy uncertainty earlier on, plants have actually readjusted back to using alternatives to US oil ... they just widened our supply options," he said.
He added that his plant had shifted to replacements such as North Sea Forties crude, Australian condensate and oil from Russia.
