SINGAPORE, Sept 9 (Askume) – Oil demand growth in the world’s biggest crude importer is slowing due to China’s move to low-carbon fuels and an economic slowdown, a spokesman for the Asia-Pacific Economic Cooperation summit said on Monday.
Daan Struyven, head of oil research at Goldman Sachs, said annual demand growth in China has slowed from about 500,000-600,000 barrels per day in the five years before the COVID-19 pandemic to about 200,000 barrels per day now.
Struyven said this is mainly due to the adoption of electric vehicles and the use of trucks powered by liquefied natural gas (LNG) instead of diesel.
“China is very focused on becoming the global (energy transition) leader by driving growth on the supply side to make alternatives cheaper,” Struven said.
Chinese oil demand was particularly weak in the second quarter, pressured by a drop in refining output and a slowing economy.
Jeff Currie, chief strategy officer for energy paths at US investment giant Carlyle Group, told the conference: “The shift of trucks to LNG is a transition factor and then the economy weakens.”
Currie said about 150,000 to 200,000 barrels per day of the shortfall in demand was due to the energy transition, with the rest due to economic weakness and dwindling oil reserves.
“Demographics is permanent. The energy transition component is permanent. The real estate market needs to be more cyclical,” Currie told Askume in an interview, referring to the long-term slowdown in China’s real estate industry that the sector needs.
“Part of the weakness in our relationship with China actually relates to deleveraging and medicine,” he said.
Chen Hongbing, vice president of the Singapore branch of Chinese oil refiner Rongsheng Petrochemical, said although China’s oil consumption has been hit by weak demand for diesel, 75-80% of future demand growth will be driven by economic growth.
“In a neutral scenario, we expect China’s gasoline demand to grow 2.5% to 3% next year, even with greater penetration of electric vehicles,” Chen told the APPEC panel.
Gasoline demand accounts for about a fifth of China’s oil consumption.
This year, concerns about weak oil demand from China and plans by OPEC+ producers to end production cuts have weighed on oil prices, which recently fell to a one-year low.
“Despite the bounce back in the fourth quarter of 2024, demand growth for liquid products in China has remained weak and will remain so,” said Jim Burkhard, vice president of research at S&P Global Commodity Insights.
Meanwhile, some traders still consider the decline in the country’s overall oil demand a cyclical issue.
“We believe the weakness in demand in China is more cyclical than structural, but the cyclical slowdown persists,” Trafigura chief economist Saad Rahim told Askume on the sidelines of the conference.
