U.S. Oil Exports to China May Decline Due to Retaliatory Tariffs

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China's retaliatory tariffs on the U.S. could lead to a decline in U.S. oil exports in 2025 for the first time since the COVID-19 pandemic, following a plateau in growth last year.

Since the U.S. lifted its 40-year ban on domestic oil exports in 2015, U.S. crude exports have surged more than tenfold, making the U.S. the third-largest oil exporter globally, behind Saudi Arabia and Russia. This growth has helped mitigate the impact of OPEC production cuts. However, China's demand for U.S. oil has declined in recent years, as it increasingly sources cheaper oil from Russia and Iran. In 2024, China imported 166,000 barrels per day of U.S. crude, about 5% of the total U.S. exports, based on ship-tracking data from Kpler.

Growth in U.S. crude exports slowed in 2024, rising only 0.6% to 3.8 million barrels per day, as U.S. companies limited shale production due to global demand concerns. Kpler analyst Matt Smith noted that China’s share of U.S. exports is substantial, and that retaliatory tariffs from China could further reduce demand.

China imported about 48% of its U.S. crude in the form of medium-density, higher-sulfur grades, such as Mars and Southern Green Canyon, which are ideal for U.S. refineries. If tariffs are imposed on Canada and Mexico, U.S. refineries could process this crude domestically, potentially reducing exports.

Vortexa analyst Rohit Rathod predicted that U.S. exports could drop to 3.6 million barrels per day in 2025 if tariffs on Canada and Mexico are enacted, and medium-sour crude remains within the U.S.

Meanwhile, 44% of China’s crude imports from the U.S. were lighter, lower-sulfur types like West Texas Intermediate (WTI), which are known as light, sweet grades. These could still find buyers in Europe and India at competitive prices.

The Louisiana Offshore Oil Port (LOOP) handled nearly half of U.S. crude exports to China last year, while another 25% came from Enbridge’s Ingleside facility in Texas. A source familiar with the Ingleside operations stated that China’s contribution was less than 15% of export volumes there, and the light, sweet crude market remains broad and unaffected by China’s tariffs.

Occidental Petroleum, a top seller of U.S. crude to China, shipped at least 13 cargoes of WTI Midland oil there in 2024. Despite the decline in U.S. oil exports to China, the overall impact on China is limited, as U.S. imports represented only 1.7% of China’s total crude imports in 2024, worth about $6 billion, down from 2.5% in 2023. China also increased imports from Canada by 30% in 2024, reaching over 500,000 barrels per day, driven by the expansion of the Trans Mountain pipeline.

Paraphrasing text from "Reuters" all rights reserved by the original author.