June jump in US crude oil exports to China

Before the trade war instigated by US President Trump, China was a reliable importer of US crude oil – a positive boom for large tanker tonne-mile demand.

US crude oil flows to China were severely curtailed when tariffs were imposed on goods and services – although no tariffs were directly placed on US crude oil. It was almost as if China was sending a message to Trump that it is not reliant on US crude oil and can source it elsewhere.

And that was the story for the last few months until June 2019. Bimco’s chief shipping analyst Peter Sand noted that China imported 1.2M tonnes of US crude oil in June, over 1M tonnes more than in the previous month. This follows months of zero imports of US crude oil between August and October 2018 and in January 2019, and mere trickles of imports in other months.

Mr Sand commented “From being a very consistent and significant buyer of US crude oil until the trade war changed it all, China was back above 1M tonnes in June 2019. As China stopped buying in August 2018, South Korea became the number one destination for US seaborne crude oil, taking 1.5M tonnes on average per month in 2019, and setting a record of 2.3M tonnes in June 2019.

He added “From a shipping perspective, long-haul exports to Asia are great. As China retreated last year, India, Taiwan, Japan and Singapore stepped up alongside South Korea to keep the very long sailing distances around. Tonne-mile demand was also at a record high in June.

South Korea’s boom in crude oil imports absorbed 19% of US crude oil exports at the expense of exports from Iran which hit zero in May and June 2019.

India, too, has massively reduced its imports from Iran. As late as April 2019, India imported 1.4M tonnes from Iran, reducing to zero in May and June. The shut-out of Iranian crude oil coincides with an increase in imports from the USA.

Mr Sand continued “Crude oil tankers enjoy higher tonne-mile demand when India turns to the US instead of Iran to source its crude oil. Geopolitical instability is often the main reason behind changes in the trade patterns of the oil tanker market. Despite growing tonne-mile demand, crude oil tanker earnings have generally been lossmaking so far in 2019.”