With the US and China contemplating their next moves in what is now officially a trade war, a parallel narrative is developing in the world of energy where Asian oil refiners are racing to secure crude supplies in anticipation of an escalating trade war between the US and China, even as Trump demands all US allies cut Iran oil exports to zero by November 4 following sanctions aimed at shutting the country out of oil markets.
Concerned that the situation will deteriorate before it gets better, Asian refiners are moving swiftly to secure supplies with South Korea leading the way. Under pressure from Washington, Seoul has already halted all orders of Iranian oil, according to sources, even as it braces from spillover effects from the U.S.-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).
Meanwhile, Chinese state media has unleashed a full-on propaganda blitzkrieg, slamming Trump’s government as a “gang of hoodlums”, with officials vowing retaliation, while the chairman of Sinochem just become China’s official leader of the anti-Trump resistance, quoting Michelle Obama’s famous slogan “when they go low, we go high.” Standing in the line of fire are U.S. crude supplies to China, which have surged from virtually zero before 2017 to 400,000 barrels per day (bpd) in July.
Representing a modest 5% of China’s overall crude imports, these supplies are worth $1 billion a month at current prices – a figure that seems certain to fall should a duty be implemented. While U.S. 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, China has threatened a 25% duty on imports of U.S. crude which is listed as a U.S. product that will receive an import tariff at an unspecified later date.