A record amount of U.S. crude oil is likely to be discharged at Chinese ports this month, and then volumes are likely to fall off sharply as the relative price advantage enjoyed by U.S. exporters fades. Vessel-tracking and port data compiled by Refinitiv indicates China will import 867,300 barrels per day (bpd) of U.S. crude in September, exceeding 653,870 bpd in August and 693,500 bpd in July. July and August both beat the previous record of 466,600 bpd from June 2018, according to Refinitiv. China’s imports of U.S. crude are likely to drop to around 500,000 bpd in October, however, and maybe lower in November, according to preliminary estimates. While it may be tempting for Washington and Beijing to talk up the recent record volumes of U.S. crude flowing to China as a sign the two sides are trying to make January’s Phase 1 trade deal work, the explanation is probably simpler. Chinese refiners went on a buying splurge in April during the brief price war between Saudi Arabia and Russia, the two leading producers in the group known as OPEC+. Although the price dispute was resolved within weeks with a new output cut agreement, it coincided with countries around the world implementing lockdowns to contain the spread of COVID-19. Much of the U.S. crude that has flowed to China was bought during the price war or in the following weeks when U.S. crude prices were in the doldrums. That period will be remembered for the dramatic close of minus $37.63 a barrel for West Texas Intermediate (WTI) futures on April 20, but it’s also worth noting it took until the middle of May for the main U.S. benchmark to close back above $30 a barrel and until June 22 to close above $40. And while Brent crude futures, the main global benchmark for light crude, also suffered from the price war and the hit to demand from the coronavirus pandemic, they did not fall as much as WTI and recovered somewhat quicker. Brent futures closed on April 20 at $19.33 a barrel, recovering to finish above $30 by May 5 and top $40 by June 5. LAST OF THE CHEAP CRUDE This means that for Chinese refiners who purchased U.S. crude in the period from late April to June, they were likely able to do this at a cheaper price than similar light crudes priced against Brent, even allowing for higher freight costs in shipping from the U.S. Gulf Coast. It’s this crude that has been arriving from July onwards, and the bulk of the cheap oil is likely to be offloaded at Chinese ports this month, although congestion at terminals may push some of it to October. China’s imports of U.S. crude for October were likely arranged in August, by which time WTI’s price advantage over Brent had lessened. This is why they are likely to drop by at least a third from September and may drop even further in November. To arrive in China by end-November, a tanker would have to depart the U.S. Gulf by Oct. 10 at the latest, meaning there is still about three weeks remaining before the window closes. So far, though, only three cargoes for November arrival have been confirmed, with two underway and one loading at Corpus Christi, according to Refinitiv. Another three are under negotiation.