August 26, 2019 / 10:01 AM / 3 months ago

Caught in tariff war, Sinopec seeks waiver for imported U.S. oil: sources

SINGAPORE (Reuters) - China Petroleum & Chemical Corp, or Sinopec, is seeking a tariff exemption for U.S. oil being imported in coming months, sources familiar with the matter said, after Beijing late last week imposed retaliatory tariffs on U.S. goods, including crude oil.

FILE PHOTO: The company logo of China’s Sinopec Corp is displayed at a news conference in Hong Kong, China March 26, 2018. REUTERS/Bobby Yip

The largest refiner in Asia is expected to receive four supertankers carrying 8 million barrels of U.S. crude at Tianjin in September and October, according to the sources, data from analytics companies Refinitiv and Kpler.

On Friday, China announced its latest round of punitive tariffs against about $75 billion worth of American goods, adding U.S. crude to the list for the first time with a 5% tariff to take effect from Sept. 1.

The tax is expected to increase the cost of a barrel of U.S. crude by $3, the two sources familiar with the matter said.

Sinopec (600028.SS) plans to seek tax exemptions from Beijing for its U.S. crude oil imports, or store the oil in bonded storage for future sales if the waiver does not come through, they said.

Beijing has provided Chinese companies a channel to apply for tax waivers, the sources said.

The company is also weighing other options, which include temporary storage of U.S. crude oil in bonded warehouse or sending the crude to other destinations, said one of the sources.

“It depends on how the communication (with the government) goes,” said the other source.

The sources declined to be named as they were not authorized to speak to the media.

Sinopec declined to comment.

(Graphic: China's imports of U.S. crude link: here)

U.S. crude futures CLc1 hit its lowest in more than two weeks during Asian trade Monday morning amid escalating trade tensions between the world’s two largest economies.

China’s move against U.S. crude is expected to put upward market pressure on other varieties of crude.

“This is bearish for U.S. grades, but bullish for Brent and Dubai price spreads as China seeks alternatives,” Energy Aspects’ Singapore-based analyst Virendra Chauhan said.

U.S. oil imports by China, the world’s largest crude oil importer, in the first seven months this year were about 126,000 barrels per day, about 63% below the same period a year ago, China customs data showed.

In June last year, Beijing announced an import tariff on U.S. oil imports but canceled it before it was implemented.

But the move has kept Chinese oil buyers on edge, and most private refiners have shunned U.S. oil.

Unipec, the trading arm of Sinopec, resumed buying U.S. crude oil cargoes in April, having halted them in September last year.

Reporting by Florence Tan and Shu Zhang in SINGAPORE; Additional reporting by Beijing bureau; Editing by Simon Cameron-Moore

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