The situation has been further complicated by the Iran sanctions and the U.S. Federal Reserve policy. China has been making significant oil purchases from both the U.S. as well as the Middle East. In the current situation, China is not likely to toe the line with the U.S. but could very well be expected to reduce its oil imports from the U.S. and substitute them with oil imports from Iran.
China can be expected to substitute U.S. oil imports with oil imports from Iran
Over the past three years, the U.S. had been witnessing a considerable increase in oil production and China was a large consumer of this production. The increase in U.S. production had compensated for the reduction in supply from Russia and the OPEC. According to data from Reuters, the value of oil exports to China from the U.S. has surged over the past one year and stands at around $1 billion per month at present.
The new tariffs would push up U.S. oil prices higher than other regions and upset this business which is doing well right now. The interest rate hikes by the Fed has also affected the oil industry. The prices for crude oil are likely to see heavy fluctuations after the OPEC’s June 22 meeting and over the coming months. Some investors have reduced their holdings in energy companies in light of the current situation.
Hit by the U.S. and China trade war turmoil, Dow opened in red and continued its triple-digit downward movement during today’s morning session.