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US oil and LNG exports may get tariff exemptions

US exporters of oil and liquefied natural gas (LNG) may get some relief from the retaliatory duties on US goods as part of the US-China trade war. Following the Phase 1 interim trade deal coming into effect, China is offering tariff exemptions on a further 696 US goods.

China is the world’s biggest net customer for both oil and LNG, with the import of energy commodities from the US set to be worth $18.5bn and $33.9bn for this year and next year respectively. Thanks to the revolution in shale production—such as by ExxonMobil, the US major behind the Mobil lubricant brand—the US is a net exporter of natural gas, and the Chinese tariffs have hindered US companies’ plans to increase the LNG export capacity.

In the announcement, the Chinese government stressed that domestic firms will apply for exemptions on tariffs according to commercial considerations and market conditions. This means they may ultimately prefer to continue buying commodities from elsewhere in the world.

The outbreak of the coronavirus has also tempered China’s consumption of oil and LNG. Travel restrictions and quarantine measures have left many factories closed or running at lower production levels, while domestic consumer activity has been hit as people avoid public places. Nevertheless, US exporters are expected to benefit as the country’s appetite for energy imports eventually recovers, although some warn that they may struggle to produce enough oil and gas to meet the terms laid down in the Phase 1 agreement.

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