By Shu Zhang and Chen Aizhu
SINGAPORE (Reuters) – A Chinese independent refinery has bought U.S. Mars crude for delivery in May, a sign that American crude exports to the world’s largest oil importer could pick up after the two countries closed a trade deal at the start of the year.
China has pledged to buy at least $52.4 billion worth of U.S. energy products over the next two years. That commitment can only be met through substantial increases in crude imports from the United States, the top global oil producer, according to traders and analysts.
Beijing started granting tariff exemptions on U.S. goods from early March, while the U.S.-to-Asia arbitrage window has opened after freight rates dropped.
This week, Panjin Haoye Chemical Co bought Mars crude from PetroChina <601857.SS> <0857.HK>, three sources with knowledge of the matter said.
“Without the import tax waiver the trade would have been impossible,” said one of the sources, adding that PetroChina is still marketing the rest of its 2-million-barrel Mars crude shipment.
Calls to Panjin Haoye went unanswered. PetroChina did not immediately respond to a request seeking comment.
Sellers of U.S. crude, including oil majors and trading houses, have offered light sweet West Texas Intermediate (WTI) Midland and medium sour Mars for May and June, said refinery and trade sources.
WTI was offered at a premium of around $3.6-3.7 a barrel to dated Brent on a delivered ex-ship (DES) basis, they said, while Mars was offered at a premium of around $1.50 to Ice Brent, trade sources said.
A range of other grades such as light sweet grades Domestic Sweet (DSW) and Bakken, light sour grade Thunder Horse, and heavier sour grade Southern Green Canyon (SGC) were also offered, said one of the sources.
A pickup in the supply of U.S. crude to China, which nearly halved last year after Beijing imposed a 5% import tariff on U.S. oil, would squeeze rival oil producers at a time when they have already been hit by a slump in China’s oil demand due to the months-long coronavirus outbreak.
“We are not buying for the time being, though it seems a large volume will be coming,” said one of the sources with a Chinese refinery.
“At least we have another option and this will put some pressure on the Middle East (oil producers).”
China’s U.S. crude imports dropped 43% to 138,790 barrels per day (bpd) in the first 11 months of 2019 from a peak of 245,600 bpd in 2018.
(Reporting By Shu Zhang and Chen Aizhu; Editing by Himani Sarkar, Shri Navaratnam, Tom Hogue and Alexander Smith)