By Siyi Liu and Chen Aizhu
SINGAPORE- China’s crude oil imports are on track to peak as soon as next year as transport fuel demand begins to decline for the world’s top crude buyer, ending the country’s decades-long run as the dominant driver of expanding oil consumption.
The speed of its transition to electric mobility has stunned oil producers and investors. No single market is positioned to replace Chinese demand, which has made up 41 percent of annual global oil consumption growth averaging 1.1 million barrels per day (bpd) over the past three decades, according to the Statistical Review of World Energy.
EV and hybrid sales in China topped combustion engine vehicle sales for the first time in July, eating into China’s need to import crude for refiners to make gasoline, with prolonged economic weakness also slowing overall oil consumption.
Demand for transportation fuels began to decline this year in a three-year plateau that started in 2023, said Ciaran Healy, demand analyst at the International Energy Agency, a view echoing a Chinese oil researcher’s. The plateau has come around two years earlier than the 2025-2027 period the IEA forecast as recently as June, Healy told Reuters.
As a result, producers and investors face the prospect that Chinese crude imports are nearing their peak, with only China’s expanding petrochemicals sector poised to underpin oil consumption in coming years.
“The oil industry is sort of figuring it out,” said Martijn Rats, chief commodity strategist at Morgan Stanley.
He expects jet fuel and petrochemicals to drive Chinese oil demand growth at about 100,000-200,000 bpd annually in coming years, far below the long-term trend.
“Other countries are picking up the slack a little bit, but the incoming data is such that they’re not offsetting the deceleration that we’ve seen in China,” said Rats.
“If China doesn’t grow at its historical trend rate, then it’s very unlikely that the world will grow at its historical trend rate,” he said.
While China’s crude imports are set for a November bounce, they fell 3.4 percent annually in the first 10 months of 2024, a rare and steep decline surpassed only by the pandemic-triggered 7.2 percent drop for the same period in 2021.
That has hit crude prices, which have traded for most of the year in the $70-$80 per barrel range despite conflict in the Middle East and Ukraine, frustrating plans by OPEC to boost supply and driving four consecutive downward revisions in the producer group’s 2024 demand growth forecasts.
In addition to the rise in EVs and an economic slowdown as China grapples with a property sector crisis, the replacement of diesel trucks by cheaper gas-fired vehicles is also stalling diesel consumption. – Reuters
