Crude Games – China dumps the United States for West Africa

The trade war betwee the two largest economies took an interesting turn with China dumping the US for its crude needs

The trade war betwee the two largest economies took an interesting turn with China dumping the US for its crude needs
The trade war betwee the two largest economies took an interesting turn with China dumping the US for its crude needs

The trade war between the two largest economies just went up a notch. In a surprise move, China has stopped buying Crude from the United States (US) and is buying it from West Africa. According to OilPrice.com, China has totally stopped buying Crude from the US[1].

“We are one of the major carriers for crude oil from the U.S. to China. Before (the trade war) we had a nice business, but now it’s totally stopped,” CMES president Xie Chunlin told Reuters on the sidelines of a global maritime forum in Hong Kong on October 3rd.

China started buying from the US in 2016 and in July, it hit 510,000 barrels per day. Assuming the US was pumping 10 million barrels per day, this works out to 5.1% of US production. US will have to find a new home for this supply and is looking at several countries including India. Remember, I said a few days ago that India is in a nice spot as far as crude is concerned?[2]

Crude concerns for India should wane

Now in addition to Iran and Saudi Arabia, the US also wants to sell to India. With good negotiating skills, India will be in a position to lock long-term crude agreements which will ensure a stable supply for its refineries. And if all these deals were to be Rupee based, that will actually result in the Rupee appreciating against the Dollar! And it will deal a death blow to the unscrupulous cabal that is shorting the Rupee and rooting for it to hit Rs.100 to a US Dollar.

But and this is a big but, India will need to do these negotiations skillfully, ensuring that it gets a good deal not only on Crude but also some commitments from these three producers to act decisively against Pakistan. Will it? Only time will tell.

References:

[1] Trade War ‘Totally Stopped’ US Crude Oil Shipments to ChinaOct 3, 2018, OilPrice.com

[2] Is the price of Crude stabilizing? Oct 4, 2018, PGurus.com

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Sree Iyer

An inventor and out-of-the-box thinker, Sree Iyer has 37 patents in the areas of Hardware, Software, Encryption and Systems.

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10 COMMENTS

  1. This is the right time that USA should lower the price of crude for India as a special case and also accept rupee payment. This will have a double effect. The world oil price will come down and rupee value will increase. High time for India to stop imports from China.

  2. I understand Modi has already met up with all the CEO’s of leading refineries and oil producers. Surely he must have a plan not to miss this huge opportunity.

  3. PM Modi’s Principal Secretary Shri Nripendra Mishra is quite experienced and adept in negotiating the right price for crude oil for India from three difference sources at our terms. He possesses the requisite knowledge, experience and aptitude for task on hand. My view is in reply to the comment of Mr K Neelakantan Nair’s

  4. ….And it will deal a death blow to the unscrupulous cabal that is shorting the Rupee and rooting for it to hit Rs.100 to a US Dollar.

    Agreed the CRUDE GAMES – among the trio – USA/China/WA – is a blessing for India

    But worries me more is why the GOI is unable to prevent the Cabal that is playing with the Indian Rupee???!!!

  5. Sree Iyer ji, how is China a democracy because in the first paragraph you wrote “two democracies” referring to China and America? I think it is a typo.

  6. India may have a problem in buying up this ‘extra’ crude because many of its older refineries are crude specific – they are built to refine only Iranian crude.

    • All private refiners can take any crude and many public too can. This is according to an official I spoke with a couple of days ago.

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