Is China Still Hesitant to Buy US Oil? US Crude Exporters Yet to Win the Biggest Market

China is expected to buy very little of U.S. crude oil as it enters the New Year 2019. High freight costs and geopolitical uncertainties are apparently weighing on China’s appetite for U.S. imports. U.S. shale output reached record levels this year, catapulting the nation into the position of the world’s largest oil producer. But with China – the world’s biggest oil consumer – seemingly reducing demand, U.S. crude could potentially lose out on a major revenue stream (atleast in the near-term).

The U.S. tariff war with China was largely centred around the trade gap narrative. With China apparently still not ready to increase consumption of U.S. oil, there could potentially be renewed concerns over geopolitical tensions fueled by U.S. trade deficit with China. U.S. President Donald Trump, however, said at the beginning of the month that negotiations with Beijing are going well.

After halting U.S. oil imports in October and November amidst the trade war, China resumed purchases in December, but bought only 1 million barrels – compared to its more than 300 million barrels of total imports, according to Refinitiv data. Many refineries in China are reportedly reluctant to continue purchases from the U.S. as some aspects of trade between the two nations are still shrouded in uncertainty.  On top of that, steep freight costs for transporting oil from the U.S. (relative to several other oil exporting nations)  might potentially be dampening China’s demand for American crude.

However, China's overall crude imports from across the globe could touch a record 45 million tonnes (10.6 million barrels per day) in December, with Russia and Saudi Arabia expected to be the top two suppliers – according to Refinitiv senior oil analyst Mark Tay.