Increased Pressure on US-China Trade Deal Implementation Amid Oil Price Collapse

[Asia Economy Beijing=Special Correspondent Park Sun-mi] Due to the sharp plunge in international oil prices, pressure is mounting on the United States, the world's largest oil producer, to fulfill the Phase 1 trade agreement with China.

According to the South China Morning Post (SCMP) in Hong Kong on the 22nd, the American Exploration & Production Council (AEPC), which has 25 major U.S. oil and natural gas companies as members, sent a letter to the Trump administration urging it to pressure China to promptly fulfill its energy import commitments.

Ann Bradbury, Chairwoman of AEPC, explained in a letter addressed to Robert Lighthizer, U.S. Trade Representative (USTR), that "China has imported very small amounts of U.S. crude oil since the beginning of the year. Meanwhile, imports of crude oil from Saudi Arabia and Russia have increased. To maintain a good relationship with the U.S. as a trusted trade partner, China should take the necessary measures rather than increasing imports of crude oil from Saudi Arabia and Russia."

As the global spread of COVID-19 has evaporated oil demand, causing oil prices to plunge to unprecedented levels, this letter assumes concerns that China may fail to fulfill its Phase 1 trade agreement commitments with the U.S. The U.S. and China signed the Phase 1 trade agreement last year. China promised to purchase $52.4 billion worth of U.S. energy products, including crude oil, natural gas, and coal, over the next two years. According to the agreement, China should import $18.5 billion worth this year and an additional $33.9 billion next year.

From the perspective of the U.S., the world's largest oil producer, if China?the world's largest oil importer and second-largest consumer?actively increases imports of U.S. crude oil, it could help mitigate losses from the sharp drop in oil prices. However, energy analysts are leaving open the possibility that China may not import as much U.S. energy as promised.

According to Goldman Sachs, to fulfill the Phase 1 trade agreement with the U.S., China needs to import an average of 500,000 barrels per day this year and 800,000 barrels per day next year. However, due to the spread of COVID-19 and the resulting decline in oil demand, significantly increasing imports is not easy. In the first quarter of this year, when COVID-19 spread severely, oil consumption in China dropped by more than 20% compared to the same period last year.

Within China, voices are growing that the sharp drop in oil prices should be seen as an opportunity to import crude oil and secure strategic petroleum reserves. Professor Jin Lei of China University of Petroleum in Beijing said, "The drop in oil prices is good news for the Chinese industrial sector, which has resumed operations after the COVID-19 outbreak." However, there are also concerns that the Chinese oil industry will suffer significant damage. Chinese state-owned oil companies all incurred losses in the first quarter of this year due to the sharp drop in international oil prices and decreased demand.

Meanwhile, on the 21st (local time), West Texas Intermediate (WTI) crude oil for June delivery on the New York Mercantile Exchange (NYMEX) closed at $11.57 per barrel, down 43.4% ($8.86) from the previous day. It nearly halved from $20 to $11 per barrel. On the 20th, May WTI futures even fell to a record low of negative $37 per barrel.

This content was produced with the assistance of AI translation services.