KEY POINTS
- China’s oil demand growth slows due to green energy transition and economic weakness.
- The shift to electric vehicles and LNG trucks significantly reduces diesel consumption.
- Analysts debate whether China’s downturn is structural or cyclical.
China’s shift towards cleaner energy and a sluggish economy is curbing the growth in its oil demand, speakers at the APPEC conference revealed.
The world’s largest crude importer is experiencing slower annual demand growth, partly due to the transition to lower-carbon fuels and a weak property market.
Impact of green transition and economic slowdown
China’s oil demand growth has dropped significantly compared to pre-pandemic levels. Goldman Sachs’ head of oil research, Daan Struyven, noted that the country’s annual growth has slowed from 500,000–600,000 barrels per day (bpd) to around 200,000 bpd.
The adoption of electric vehicles (EVs) and liquefied natural gas (LNG)-powered trucks are key factors in this shift.
“China is focusing on becoming a global leader in energy transition by making alternatives cheaper,” Struyven explained.
According to Reuters, this shift has reduced demand for traditional diesel-powered trucks, impacting the country’s overall crude consumption.
Jeff Currie, chief strategy officer for energy pathways at Carlyle Group, added that around 150,000–200,000 bpd of lost demand growth can be attributed to the transition to greener fuels, with the remaining impact caused by economic weakness and inventory reduction.
Cyclical vs structural downturn
While some analysts see China’s oil demand issues as structural, others believe they are more cyclical. Jim Burkhard, vice president of research at S&P Global Commodity Insights, remarked that despite a fourth-quarter bump in 2024, China’s oil demand growth will remain subdued.
Meanwhile, Saad Rahim, chief economist at Trafigura, suggested that the downturn is more cyclical, driven by economic deleveraging and a struggling property sector.
However, even with the rise of electric vehicles and LNG-powered trucks, China’s gasoline demand is expected to grow by 2.5 percent–3 percent next year, according to Hong-Bing Chen of Rongsheng Petrochemical. Gasoline consumption accounts for around 20 percent of China’s oil demand.
Outlook for China’s oil demand
China’s reduced demand this year has impacted oil prices, raising concerns about the country’s slowing economy and global oil supply.
However, industry experts expect China’s oil consumption to stabilize, driven by anticipated economic growth, which could boost future fuel demand.
China’s focus on transitioning to green energy, along with ongoing economic challenges, is likely to keep its oil demand growth at a slower pace in the near term, as the country adopts cleaner energy alternatives and works to address its economic issues.
