Chinese state-owned refiners were awaiting more instructions from Beijing before resuming US crude purchases while commodity trading houses began evaluating their options in the physical market after the trade agreement signed over the weekend.
Oil traders were cautious about resuming US crude supply to China due to market uncertainties and concerns over a narrow trading window until March, but market participants were keen to exploit the opportunity, several traders and refinery executives said, requesting anonymity.
"Theoretically, imports from the US are unlikely to resume immediately due to the long trading cycle between the two countries, and the three-month window from January 1 is too short," a Beijing-based crude oil trader said, citing risks of cargoes being stranded on the water.
But the Chinese government was likely to nudge state-owned companies to increase US crude imports to express sincerity following the trade deal, he added.
State-owned oil refineries were major consumers of US crude, purchased largely through Unipec, the trading arm of Sinopec, China's largest refiner by capacity. Their crude procurement strategy depends on both the government?s mandate and commercial requirements.
This was seen in May this year, when US Secretary of Commerce Wilbur Ross led trade discussions with Beijing to reduce the US trade deficit by boosting agricultural and energy exports to China.
The talks were followed by Unipec?s purchase of around 16 million barrels of US crude oil for loading in June, the biggest monthly volume of US crude ever lifted by the company, although volumes fizzled out when trade tensions escalated.
Since then, bilateral oil trade between the two countries dried up and Chinese refineries shunned US barrels, despite no firm tariffs imposed by Beijing. The caution persists.
"[The truce] is a relief and there will be opportunity to trade. But it is difficult to say when we will resume importing US crude oil," an official at Unipec said.
The official said US crude was not attracting tariffs before anyway, but trade had fallen because external factors also affect decision making.
"We need to discuss what to do as the next step. We don't have a final decision yet," a second Unipec executive said separately.
US CRUDE TRICKLES IN
China's crude oil imports from the US fell to zero in October for the first time since February 2017, latest data released by the General Administration of Customs showed. November volumes also remained thin.
As of Tuesday afternoon, the VLCC New Courage, carrying about 1 million barrels of US-origin Southern Green Canyon crude, was waiting for a berth in Lanshan port of Rizhao city in the eastern Shandong province, according to traders.
They said Shandong-based independent refiner Yuhuang Petrochemical was the buyer of the cargo, which was traded against ICE Brent on a CFR Shandong basis, and Unipec was the original charterer of the ship.
New Courage departed the US Gulf Coast in late September and loaded a second time at Aruba in the Mediterranean in early October, according to S&P Global Platts vessel tracking software cFlow.
It discharged part of its cargo at Zhoushan port in eastern Zhejiang province, before heading to Lanshan.
The SGC oil grade, with an API of around 28 and sulfur content of around 2.3%, was a suitable feedstock for independent refineries, a trader said. The shipment is unique because independent refineries generally avoid US crudes due to political risks.
On the other hand, Sinopec has been keen on US crude oil.
In September, Unipec President Chen Bo cited plans to expand US crude trading in the long-term, and raise its shipments to China to 500,000 b/d in coming years from 300,000 b/d in 2018.
Unipec has also leased 10 million barrels of crude storage in the US Virgin Islands, with a deepwater terminal for VLCCs, to support its long-term US crude business.
