August 10, 2018 / 2:29 AM / 2 months ago

China's oil tariff move a relief for Sinopec, tactic in trade war

    By Chen Aizhu
    BEIJING, Aug 10 (Reuters) - China's decision to remove crude
oil from its latest tariff list in an escalating trade war with
the United States was a relief to state oil firms prompted by a
strong lobbying effort by main importer the Sinopec Group,
Beijing-based oil sources said. 
    Dropping crude oil from the final list on $16 billion in
U.S. goods announced late on Wednesday underscores the growing
importance of the United States as a key global producer and a
critical supply source as China, the world's top oil importer,
seeks to diversify supplies.             
    Removing crude imports, worth roughly $8 billion based on
Sinopec's earlier forecast of 300,000 barrels per day (bpd) in
annual imports, also gives Beijing room to manoeuvre in future
negotiations with Washington, especially as it may soon lose
some Iranian oil shipments due to reimposed U.S. sanctions. 
    "Sinopec did a lot of lobbying work with the government,"
said one person with direct knowledge of the state refiner's
lobbying of various agencies such as the Ministry of Finance and
the Ministry of Commerce. 
    Sinopec declined to comment.
    The revision came after Sinopec            , Asia's largest
refiner and biggest buyer of U.S. oil, suspended new bookings
until at least October over worries that a 25 percent tariff
would prohibit it from finding buyers in China.              
    "The U.S. will be the single largest source of new oil
supplies outside OPEC. It's in China's interest to diversify
supplies," said a second source, a state oil trading manager. 
    The move could encourage Sinopec to bring in cargoes loaded
in June and July, and also resume new bookings, the sources
said, declining to be named due to the sensitive nature of the
topic.
    China's U.S. oil purchases shot to a record 553,000 bpd for
June loadings, worth nearly $1 billion.                         
    China now takes in around 650,000 bpd of Iranian oil, trade
worth roughly $15 billion a year. State oil giants China
National Petroleum Corp (CNPC)            and Sinopec have
invested billions of dollars in Iranian oil fields, and have
been importing their equity production. 
    Dropping oil from the list could also be seen as a good-will
concession that could help China win a waiver to keep buying
Iranian oil even as U.S. President Donald Trump threatens to
choke off Tehran's oil exports completely, analysts said. 
    But if the trade war is not scaled back, and Trump carries
through threats of tariffs on $200 billion in Chinese goods,
Beijing could put U.S. crude back on the list, the sources said.
               
    "China's decision to drop crude may be an attempt to keep
U.S. crude as leverage for potential negotiations," Michal
Meidan of Energy Aspect wrote in a client note on Thursday. 
    But it could also just give Chinese buyers more time to
bring in U.S. crude they have already bought, she said.  

 (Reporting by Chen Aizhu; editing by Tom Hogue)
  
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