Targeting US petroleum will cause uncertainty: expert

China's proposed tariffs on US petroleum imports, part of a mounting trade war between the two countries, would crimp sales to the shale industry's largest customer, adding new pressure on US crude prices, energy executives and analysts said.

Photo: VCG

China has said it would slap a 25 percent tariff on imports of US crude, natural gas and coal on July 6 if the US went ahead, as planned, with its own tariffs on Chinese goods that same day.

Energy would be added for the first time to a burgeoning trade dispute that has hit imports of Chinese metals and solar panels, and exports of US medical equipment and soybeans.

Targeting petroleum puts the Trump administration's "energy dominance" agenda in China's cross-hairs as US shale has grabbed shares from Middle East suppliers in Asia.

China is the largest customer for US crude, importing about 363,000 barrels a day in the six months ending in March 2018. Thomson Reuters shipping data shows those exports have increased since.

US oil exports have steadily grown since the four-decade-old ban on crude exports was lifted at the end of 2015.

China's tariff threat caught US producers off guard because it had been discussing buying more US energy and agricultural products to reduce annual trade surplus with the US. The levies could boost suppliers of West African crude at the expense of US exports.

The tariffs are "creating a whole new set of uncertainties on top of what's already there," Daniel Yergin, vice chairman of consultancy IHS Markit, said.

On Friday, Organization of the Petroleum Exporting Countries oil ministers will gather to consider sharply increasing the group's production this year, a move advanced forth by Saudi Arabia and Russia. 

The change is opposed by members Algeria, Iran, Iraq and Venezuela. The US recently set new sanctions on Iran's petroleum industry, which is expected to disrupt oil flows.