China is now expected to dramatically reduce its intake of US crude oil imports in the coming weeks and as many energy analysts are sharpening their pens, there will be new economic attacks. On Wednesday, the session saw crude drop at one stage to a seven-month low. President Trump has of course raised the stakes of the trade war, pointing to September 1 as a date to start new tariffs and in the eyes of many, the point of no return for the trade war. The most recent accusation is the Trump said that China is a currency manipulator, in an ongoing tit-for-tat battle between the largest and second largest economies in the world. Chinese buyers recently bought 247,000 barrels per day in May, which was a 9-month high, and confirmed by the Energy Information Administration (EIA).
But consider this. According to Mathew Smith, director of commodity research at ClipperData, who was interviewed on CNBC via email, the Chinese government is now running out of goods to target for tariffs. Also, what about the Strait of Hormuz, is the US going to start disrupting all flows of oil to China? It is possible.
China will work to disrupt the next US election in 2020, and in our view there will likely not be a trade deal until after the next election. The social unrest in the US up to the 2020 election will be unlike anything we have seen in the past.