Unpacking China's new tax: Implications on crude oil and refined product markets

<p style= "margin: 0in; font-family: 'Akkurat Pro'; font-size: 11.5pt;">China on May 14 announced that it will implement a consumption tax on mixed aromatics, light cycle oil and bitumen blend from June 12 in an effort to close a loophole in its tax system. This tax is expected to have repercussions not only in the domestic market, but also in the regional refined products market and crude markets.</p> <p style= "margin: 0in; font-family: 'Akkurat Pro'; font-size: 11.5pt;">  </p> <p style= "margin: 0in; font-family: 'Akkurat Pro'; font-size: 11.5pt;">Mixed aromatics and light cycle oil or LCO are used as blend stocks in gasoline and gasoil, and bitumen blend is used as a feedstock by independent refiners.</p> <p style= "margin: 0in; font-family: 'Akkurat Pro'; font-size: 11.5pt;">  </p> <p style= "margin: 0in; font-family: 'Akkurat Pro'; font-size: 11.5pt;">The tax is expected to alter domestic supply-demand balances, regional trade flows, and types of crudes imported into China.</p>