U.S. Oil Stays Closer to Home as Top Buyer in Asia Shuns Supply

The long-running trade war between the U.S. and China is keeping ships from ferrying American oil far, far away.

The distance that U.S. crude traveled by sea shrank in the second half of 2018 as fewer cargoes made the two-month journey to Asia, according to shipbroking firm Braemar ACM. That’s because China — the world’s biggest oil importer — turned away from American supplies, meaning exports from the Gulf Coast are increasingly confined to ports within the Atlantic Basin.

Tankers hauling crude from the U.S. traveled an average of 7,530 nautical miles in the fourth quarter, down from 8,470 in the second quarter, according to Braemar. In the latter half of 2018, the average distance traveled by oil imported into China was 300 nautical miles less than at the end of 2017, the shipbroking firm said.

Voyage lengths slumped as buyers in China avoided cargoes from the U.S. because of the prospect that oil may be targeted for tariffs due to escalating trade tensions between Beijing and Washington. That was even after the Asian nation removed crude from a list of American goods that will incur a levy, following an earlier threat that duties will be imposed on imports of the commodity.

China bought a record volume of over two million metric tons of American oil in January 2018, while imports plunged to zero in the same month this year.

Looking Elsewhere

As China’s interest in U.S. oil has plummeted, so has Asia’s share of total U.S. seaborne exports, based on data from Vortexa, Braemar said. The Asian country’s purchases from other producers such as Russia and Saudi Arabia, however, remained supported. That’s despite planned output reductions by a coalition of the Organization of the Petroleum Exporting Countries and its allies that included both of those nations.

While other Asian refineries across Japan, South Korea and Taiwan continued to haul shipments from the U.S., their purchases were not sufficient to pick up the slack left by a complete halt in Chinese imports. That was in spite of flows from America to the east being economically viable for most of the second half of last year, Braemar said.