China's Oil Demand Growth Slows Down

Slowing Oil Demand in China

China's oil demand growth is experiencing a slowdown due to a weaker economic performance and a shift towards electric vehicles and LNG-fueled trucks. This was the sentiment expressed by oil industry executives at the APPEC conference in Singapore. Currently, the Chinese oil demand growth has reduced to approximately 200,000 barrels per day (bpd) annually, a significant drop from the 500,000 bpd-600,000 bpd annual growth witnessed in the five years preceding the Covid pandemic, according to Daan Struyven, Goldman Sachs’s head of oil research.

Reasons for the Slowdown

The slower growth in oil demand can be attributed to the increased penetration of electric vehicles (EVs) and the rising use of LNG in trucks, which has negatively impacted diesel demand. The ongoing property crisis and sluggish economic growth have also contributed to the reduced demand for diesel. Analysts suggest that the gradual shift in transportation towards EVs and LNG trucks could be permanently reducing some road fuel demand.

China's Role in Global Energy Consumption

Despite the slowdown, industry analysts caution against dismissing China as a key player in global energy and oil consumption. They argue that an economic rebound could potentially stimulate oil demand once again. The shift towards EVs in China is expected to result in domestic gasoline demand peaking either this year or next, according to Russell Hardy, CEO of Vitol Group.

Impact on Gasoline Demand

"Gasoline is likely to peak this year or next year in China — not because nobody’s moving, but simply because the fleet is slowly changing towards electric vehicles,” Hardy said in an interview with Bloomberg. Earlier this year, Vitol postponed its expected timeline for global peak oil demand beyond 2030, citing a slower pace of the energy transition. However, Vitol anticipates a weakening in Chinese gasoline demand growth and diesel demand due to the electrification of transport and increased use of LNG for fueling trucks.

Future Projections

The research unit of the China National Petroleum Corporation (CNPC) predicts that demand for petroleum products in China could peak before next year. This projection is based on the expectation that the energy transition will continue to accelerate, thereby eliminating oil product demand growth.

Bottom Line

The current trend of slowing oil demand growth in China is indicative of a global shift towards cleaner, renewable energy sources. This shift, driven by economic factors and a push for electrification in transport, is likely to have significant implications for the global oil industry. What are your thoughts on this development? Do you think this trend will continue, and what impact will it have on global energy consumption? Share your thoughts and this article with your friends. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.