Oil and Gas Traders Seek Waivers from Beijing Over U.S. Tariffs

As tensions between the United States and China escalate, oil and gas traders are bracing for the impact of tariffs imposed by Beijing on U.S. crude and liquefied natural gas (LNG) imports. The Chinese government announced that starting on February 10, they would levy tariffs of 15% on U.S. coal and LNG, and 10% on crude oil, farm equipment, and some autos.

Despite the looming tariffs, four tankers carrying 6 million barrels of U.S. crude and two LNG vessels are currently en route to China. Trade sources suggest that companies are likely to seek waivers for tankers that have already been booked, although obtaining waivers for new deals may prove more challenging.

One Chinese trade source mentioned that reselling U.S. oil was not financially viable due to unfavorable prices amidst rising production. Additionally, traders dealing with U.S. oil reported that cargoes destined for China have not been re-offered in the market, indicating a surplus of unsold cargoes for March loading.

Unipec, the trading arm of Sinopec, China’s largest refiner, is expected to strategize in response to the tariffs. With long-term deals and involvement in the U.S. pipeline oil business, Unipec may explore options such as increasing swaps with buyers in Korea and Japan or redirecting sales to domestic U.S. customers.

On the LNG front, shipments to China are anticipated to decline significantly post-tariffs, leading to a shift towards European and alternative Asian markets. Kpler analysts predict that China will increase LNG imports from suppliers like Qatar and Russia to compensate for reduced U.S. shipments.

Implications for U.S. Oil and LNG Flows

Despite the tariff challenges, several Very Large Crude Carriers (VLCC) have been booked by major firms including Vitol, Gunvor, Occidental, ExxonMobil, and ATMI. These companies are gearing up for potential disruptions in oil flows to China.

For LNG, vessels like Mu Lan and Wudang are en route to Chinese terminals, controlled by PetroChina. However, with the expected decline in U.S. LNG flows to China, alternative suppliers are set to gain traction in the market.

Overall, the impact of tariffs on U.S. oil and LNG imports underscores the complexities of global trade dynamics. As traders navigate the evolving landscape of international commerce, strategic decisions will be key to mitigating risks and maximizing opportunities in the energy sector.

(Reuters – Reporting by Florence Tan, Chen Aizhu, Emily Chow, and Liu Siyi in Singapore, Arathy Somasekhar in Houston; Editing by David Evans and Sonali Paul)