China tariff threat could be a boon for Gulf oil exports

China is one of the largest consumers of US shale oil. (Reuters)
Updated 18 June 2018
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China tariff threat could be a boon for Gulf oil exports

  • Tariffs proposed for crude oil, coal and other energy projects.
  • China is the largest Asian customer for US crude.

LONDON: Gulf oil producers may benefit from China’s threat to impose import tariffs on US crude and other energy products, as key exporters meet to discuss production increases later this week.

China, one of the largest buyers of US crude oil surprised many late last week when it announced plans to tax such imports, as part of retaliatory measures following the decision by US President Donald Trump to impose $50 billion worth of tariffs on a variety of US goods.

The announcement comes as China looks for a different oil supply mix ahead of likely reductions in its imports from Venezuela and Iran.

Carsten Fritsch, a commodities analyst with Commerzbank, said that while China’s reduction of imports of Iranian crude should not be overestimated, the decline of production from Venezuela left the country with no choice but to seek alternative sources of oil.

“The US could could have been an alternative supplier but of course that won’t be the case if a 25 percent import tariff comes into effect,” Fritsch told Arab News.

“Some of the Arabian Gulf countries might have an advantage in plugging the gap, given the similarity of the crude types, and the same shipping lanes that would be used.”

China is currently the largest Asian customer for US crude; imports rose to 3.89 million metric tons in the first quarter of the year, compared with just 443,000 metric tons for the year ago period, according to figures from S&P Global Platts, with the US’s market share rising to 3.5 percent at the end of March.

American crude has proved competitive for China; the US benchmark WTI averaged a $1.83 per barrel discount to oil from the North Sea Forties on a delivered basis into China in May, and a 74 cents per barrel discount to Abu Dhabi’s Murban crude, according to S&P Global Platts calculations.

But China is likely to find it easier to replace US crude imports than US producers will to get new customers, according to Thomson Reuters commentator Clyde Russell.

“It’s not hard to imagine a scenario in which China encourages Saudi Arabia and Russia, the world’s top oil exporters and partners in the agreement to restrict output, to pump more crude,” said Russell yesterday.

“China would then buy the additional Saudi and Russian output, using it to replace cargoes from the US, and even from Iran, assuming the renewed US sanctions against Iran force Beijing to curtail imports.”

The prospect of restrictions on US oil come ahead of a meeting of OPEC and other oil producers in Vienna later this week, with an increase in oil production seen as increasingly likely following the eradication of oversupply and the recovery of prices.

Oil prices were up around 1.5 percent yesterday afternoon, on reports from Bloomberg that producers were considering increasing output by between 300-600,000 barrels per day, compared with a 1.5 million barrel per day initially sought by Russia.

In addition to tariffs on oil, China has also threatened imports on other energy sources, notably coal, in a bid to hurt Trump politically as well as economically.

“Coal miners count among Trump’s most vocal backers, but if China does stop buying US coking coal, it may force producers to accept lower prices from other buyers in order to move cargoes,” said Russell.

“The Chinese have probably calculated that they can take the pain from a trade conflict longer than Trump can, or at least longer than the US. economy, companies and workers will be prepared to tolerate.”


Companies in Oman need government permission before hiring expats

Updated 09 December 2018
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Companies in Oman need government permission before hiring expats

  • A new traffic light-themed online system is currently being rolled out in Oman, in which companies’ Omanization quotas are being monitored
  • “The new system focuses on enhancing Omanization rates in the private establishments”

DUBAI: Oman-based companies will have to secure the Ministry of Manpower’s go ahead before they can hire expats, local daily Times of Oman reported this week.
A new traffic light-themed online system is currently being rolled out in Oman, in which companies’ Omanization quotas are being monitored.
Under this new system, companies that meet Omanization standards set by the government will receive a green signal online, allowing them to proceed with hiring expat employees.
Companies with unclear Omanization policies will be given a yellow signal, while companies that fall short of meeting their quotas will receive a red signal, barring them from moving forward with hiring expat employees.
“The new system focuses on enhancing Omanization rates in the private establishments,” said a ministry spokesperson.
The step taken by the government is part of the Omanization drive to recruit more of its citizens in private companies, a similar push is underway across the GCC where countries like Saudi Arabia and Kuwait have also been trying to increase the number of nationals in private sector employment.

Earlier this year, expat workers in the country faced a six-month visa ban across 87 industries, including media, engineering, marketing and sales, accounting and finance, IT, insurance, technicians, administration and HR.