The Slowdown in China’s Oil Consumption
China, a key driver of global oil demand, is currently experiencing a notable slowdown in its oil consumption. This decline has been particularly sharp in 2024, with oil demand dropping by 2% year-to-date (YTD). Reports from China’s National Bureau of Statistics (NBS) revealed that oil demand fell by 8% year-on-year (y-o-y) in July, the lowest since 2009 (excluding the COVID period). As a result, China’s average oil demand from January to July 2024 stood at 14.3 million barrels per day (MMbls/d), which represents a significant drop compared to previous years.
Key Factors Behind the Decline
Several factors contribute to this reduction in China’s oil demand. A weakening industrial sector and slowing construction activities have played a major role. Additionally, China’s crude oil processing also decreased by 6% y-o-y in July, indicating further stress on the country’s refining industry. The reduced demand for refined products has been reflected in a 2% drop in fuel sales this year, according to major oil companies such as PetroChina and Sinopec. Diesel consumption, closely tied to industrial activities, has dropped by 4% YTD, signaling deeper economic challenges.
The Future of Oil Demand in China
Despite the overall decline, gasoline demand has risen by 7% YTD, driven by strong consumer consumption. However, as electric vehicle (EV) adoption accelerates, analysts predict that gasoline demand will plateau within the next five years. Kerosene demand, mainly supported by recovering air travel, rose by 19% YTD. Still, the outlook for China’s oil demand remains weak, with overall consumption expected to fall by 2-4% in 2024. This decline will likely have significant global implications as China has long been a major player in the oil market.
The Global Implications
With China accounting for over 50% of global oil demand growth over the past two decades, its slowing demand has raised concerns for global oil prices. Without signs of a turnaround, analysts believe that oil prices could remain lower through 2024 and into 2025. Moreover, the International Energy Agency (IEA) is likely to revise its forecast downward as China’s demand outlook weakens.
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