NEW YORK: US oil and gas exports should jump over the next two years if China fulfils its pledges to increase energy purchases under the trade deal between the world’s two largest economies signed on Wednesday, executives and traders said.
The accord did not specify quantities of the products but it commits China, the world’s biggest oil importer and second-largest liquefied natural gas (LNG) importer, to buy $52.4 billion more of US energy supplies over the next two years, report agencies.US energy executives and analysts welcomed the deal after LNG and crude exports to China largely dried up last year.
However, many uncertainties about implementing the purchases remain and market reaction was mixed with oil trading lower after the deal signing but rising during the Asian morning.
China’s commitments under the deal amount to an increase of $18.5 billion in 2020 and $33.9 billion in 2021 from a baseline of $9.1 billion in 2017. The agreement “is a step in the right direction that will hopefully restore the burgeoning US. LNG trade with China,” said Jack Fusco, chief executive of Cheniere Energy Inc, the largest exporter of US LNG.
Fusco attended the ceremonial signing at the White House.
Despite China’s withdrawal from most US LNG purchases last year, US sales to other Asian countries, Europe and Latin America still drove the US to become the world’s third-biggest LNG supplier in 2019, behind Qatar and Australia. “New long-term LNG deals need to be signed, on top of incremental short term and spot trading, to achieve those ambitious numbers” said Li Yao, founder and chief executive of SIA Energy, a China-focused energy consulting firm.
“Oil as well, as they are the biggest in value and quickest to execute.” Goldman Sachs analyst forecast in a January 10 report that the agreement would mean China may increase its crude imports to 500,000 barrels per day (bpd) in 2020 and 800,000 bpd in 2021.