Like EVs or not, China has gone all in. China’s oil demand may peak soon.
S&P Global:
“China’s peak oil demand looms”
“China guzzled roughly 16.5 million b/d of the world’s oil supply in 2023, all liquids included. As the world’s second-largest oil consumer, accounting for about 16% of global demand, a peak or plateau in its refined oil product demand is crucial to the oil market. The timing of the peak and the pace of oil demand decline from there on will affect global oil balances and, consequently, oil prices.
“With a total oil demand tripling that of India’s, the world’s third-largest oil consuming nation, China is the only major developing country that is likely to see demand of gasoline and gasoil/diesel to reach a plateau at present or in the near future,” said Kang Wu, global head of oil demand research at S&P Global Commodity Insights. “While oil demand in nearly all developed countries has peaked, the vast majority of developing countries other than China will see their oil demand continue to grow in the foreseeable future.”
“As such, China is a decisive force in determining if and when the global oil demand will peak,” Wu added.
Analysts have varying views on the year when China’s oil demand will peak, but most of them agree the decline will not be so dramatic as to trigger a sharp downturn in global oil demand.
Commodity Insights projects China’s total refined product demand, excluding direct crude burn and all NGLs, will peak in 2027 at 16.4 million b/d. It consumed 15.5 million b/d in 2023. Global refined product demand is forecast to peak in 2028 at 91.5 million b/d, compared with 88.4 million b/d demand in 2023.”
However, China’s oil demand growth in the second quarter of 2024 – merely 16 months after reopening from pandemic-related restrictions – has been slower than expected, with a year-on-year reduction in crude throughput. The combination of rapid growth in the displacement of road transportation fuels, muted demand from construction and manufacturing sectors, and extreme weather disruptions hit consumption.
The average utilization of independent refineries in China’s Shandong province fell to 52% in June 2024, the lowest level since March 2020, when the country’s oil demand was slowly recovering from the pandemic outbreak, data from local information provider JLC showed. China’s independent refineries are swing suppliers and their activity directly reflects the country’s oil demand.
Gasoil, the largest component of China’s oil barrel, accounting for about 22% or 3.8 million b/d of the country’s refined product demand, either already has or is close to reaching peak as growing sales of LNG-fueled heavy-duty trucks displace conventional diesel-powered trucks, analysts said.”
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