WTI Houston does not have the problem WTI oil futures has

If, for instance, the WTI Houston price is assumed to be representative of the price a Chinese refiner would pay for spot cargo, the question becomes, why aren’t buyers flocking to the grade?

The deal between Washington and Beijing, signed on January 15, called for a huge increase in China’s imports of US energy, amounting to an additional $52.4bn over 2020 and 2021 over a baseline of $9.1bn in 2017.

Most of the increase would have fallen on crude, though China was also expected to bulk up on imports of US coal and liquefied natural gas (LNG).

However, since the deal was signed, China’s imports of US energy have barely ticked higher, and while it may be tempting to blame the coronavirus pandemic, that’s clearly not the case.

Given the lag between buying a cargo of crude and delivering it from the US Gulf to China, it would have been unreasonable to expect much of an uptick in imports of US energy before April. Indeed, there was no US crude imported by China in the first three months of 2020, and none is scheduled to arrive this month either.

For May, only three tankers, carrying a mere 4.63-million barrels, were expected to arrive before the end of the month, according to vessel-tracking and port data compiled by Refinitiv.

For June, it’s even more dismal, with only one cargo currently under negotiation, though it’s possible that more vessels can be arranged with a May departure date and a June arrival.

US energy isn’t competitive

For LNG, April marks the first month since March last year for US cargo to arrive in China, with four vessels carrying 280,000 tonnes of the super-chilled fuel due to be discharged by the end of the month.

A further two are scheduled to arrive in May, but even this volume is modest and nowhere near the rate of LNG imports in the first six months of 2018, when 25 US ships offloaded at Chinese ports.

Coal is a similar story, with one vessel discharging in March, two scheduled for April (though one seems to be pottering around near Indonesia rather than heading to China), and two expected in May.

No matter how it is sliced and diced, China doesn’t appear to be making much effort to boost imports of US energy, despite increasing its overall intake of crude oil by 5% in the first quarter of this year from the same period in 2019; coal by 28.4%; and natural gas in the form of both LNG and via pipeline by 1.8%.

While there may be politics at play, it’s also worth noting that even at the current low price of WTI, it may not be competitive with similar quality light crudes from other regions. June delivery Brent crude ended Monday’s trade at $26.73 a barrel, about $5 more than WTI Houston.