Economía 31-08-2017

US opens oil market with China

The United States is rapidly opening a niche to fill the void left by the reduction in shipments from OPEC countries. Last year, US oil exports to China were insignificant. By 2016, companies shipped on average only 10,000 barrels a day to China, less than two supertankers all year round.

The United States ranked 32nd on the list of Chinese import sources in 2016, according to data from Chinese customs authorities, below Mongolia and Sudan and just above Yemen, a war-torn country.

But, that all changed drastically this year. US crude oil exports to China surpassed sales from OPEC countries such as Libya and China's neighbors such as Vietnam, Kazakhstan and Australia.

The upward trend continued for the first seven months of 2017. Sales averaged 131,000 barrels per day in that period, but in the last four months, the daily average exceeded 200,000 barrels. That is enough to bring the United States to the 11th spot in China's oil supplier ranking, which puts the country barely behind OPEC heavyweights like Venezuela, Kuwait and the United Arab Emirates.

OPEC's bid to raise prices by restricting production, coupled with China's seemingly insatiable greed for imported oil, has undoubtedly helped open up a market for US suppliers. They have also seen a drop in transport costs and ever larger rebates for US reference crude oil, the WTI, for both North Sea Brent, which is used as a price reference for West African varieties, as the Oman / Dubai average, which is used to fix the price of exports from the Middle East to Asia.

USA is likely to rise in the rankings as producers seek a way out of rising production volumes, remains a net importer of crude oil. This could be music to the ears of US President Donald Trump, as rising oil sales will help reduce the trade deficit with China.

But it will not be so pleasing to the OPEC countries, which have long seen China and other emerging Asian countries as their most important markets. Nor is it helping to reduce world stocks. While the volume stored in the US is declining, the volume in China continues to increase.

China's trade in crude oil and refined products increased by 16.5 million barrels, or 5%, since the beginning of the year. Strategic stocks, which are not reported, almost certainly have also grown. This is not exactly the rebalancing that OPEC is trying to achieve.

As oil demand is stagnating in the developed world, OPEC producers have turned to Asia, securing markets with investments in refining capacity and storage in the region.

Saudi Arabia has already given Russia its place as the largest oil supplier to China and this year has also seen how OPEC member Angola came in second. And it will be difficult to recover that first place: Russia seems able to consolidate its position as the largest supplier of crude oil to China once the second tranche of an oil pipeline connecting East China's oil fields with refineries Chinese

These pipelines will allow Russian producers to ship another 300,000 barrels per day of Siberian crude directly to China. The flow of US oil to China remains vulnerable to any increase in transportation costs or the reduction of the price differential with respect to other world reference varieties.

Energia 16