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China’s demand for oil, long an important driver of global oil demand growth, slowed dramatically during January–September 2024. Between 2000 and 2023, China accounted for 50 percent of the growth in world oil demand, averaging an annual increase of 518,000 barrels per day (bpd).[1] However, analysts expect China’s oil demand will increase by far less in 2024. The International Energy Agency (IEA) now projects that the country’s oil demand will grow by 180,000 bpd this year, down from the 410,000 bpd it projected in July.[2] Similarly, Energy Intelligence now sees China’s oil demand increasing by fewer than 100,000 bpd, down from the 450,000 bpd it expected in January.[3] Looking ahead, ongoing gains will be muted by both cyclical and structural factors, with the latter already starting to weigh on consumption. In this Q&A, the authors discuss why China’s oil demand is slowing down, whether China’s stimulus will boost demand, and what the oil market implications are.
Why Is China’s Oil Demand Growth Decelerating?
China’s oil demand is growing more slowly because of rising sales of new energy vehicles (NEVs)—a category that includes battery electric vehicles, plug-in hybrid electric vehicles, and fuel cell electric vehicles—China’s high-speed rail (HSR) network, and a property sector slump.
Gasoline demand growth is being reduced by NEVs. NEVs accounted for 38.6 percent of new car sales in China from January–September 2024, up from 31.6 percent for 2023.[4] New policy support is likely to further boost NEV sales. In August, Beijing doubled the subsidies for trading in old NEVs and internal combustion engine (ICE) vehicles for new NEVs and more fuel-efficient ICE vehicles.[5]
China’s HSR network has also taken a bite out of China’s oil consumption, to include road transport and aviation fuels. The IEA estimates that China would have needed an additional 300,000 bpd of oil had growth in the country’s railway use facilitated by HSR investment not happened.[6]
China’s property sector slump and liquefied natural gas (LNG) truck sales are weighing on demand for diesel, the largest component of China’s oil product consumption.[7] The floor space of new home starts decreased by almost 60 percent between 2019 and 2023 (see Figure 1). This decline undoubtedly has negatively impacted demand for diesel, which fuels construction equipment and the transport of construction materials.[8] The share of natural gas trucks in heavy-duty truck sales jumped from 9 percent in 2022 to 42 percent in January–August 2024.[9]
During January–June 2024, China’s gasoline consumption grew by just 0.32 percent over January-June 2023, while diesel consumption decreased by 3.52 percent over January–June 2023.[11] Gasoline and diesel could cease to drive China’s oil demand growth in the next few years, if they have not done so already. A PetroChina research institute said that demand for both fuels peaked in 2023 (see Table 1). Other analysts expect gasoline and diesel demand to peak before 2030. Even if demand for liquefied petroleum gas and other products such as jet fuel and petrochemicals continues to grow for several years, China’s total oil demand may still peak before the end of the decade.
Table 1: Projections of when China’s diesel and gasoline will peak
Commodity Insights S&P Global International Energy Agency Kpler PetroChina Planning & Engineering Institute Vitol
Will China’s Stimulus Support Growth in China’s Oil Demand?
Beijing has been announcing stimulus measures since late September, including:
Recapitalization of six major commercial banks (September 24)[13]
Cuts to interest rates and mortgage rates, and stock market stabilization measures (September 24)[14]
Plans to significantly increase the issuance of central government debt to help local governments manage debt, support people with local incomes, and stabilize the property market (October 12)[15]
Expansion of funds for the completion of unfinished housing projects on the “whitelist,” to four trillion yuan ($562 billion) from the 2.23 trillion yuan ($313 billion) already approved (October 17)[16]
Although Minister of Finance Lan Fo’an said in October that more stimulus policies would follow the conclusion of the National People’s Congress Standing Committee meeting on November 8,[17] Beijing did not release any. Instead, Beijing announced a 10 trillion-yuan ($1.4 trillion) debt-swap package to help local governments move off-the-books debt to lower-interest, on-the-books debt.[18] Minister Lan said more stimulus will come next year.[19]
The stimulus measures are unlikely to provide a strong boost to oil demand because their purpose is to steady the economy and achieve this year’s growth target of around 5 percent rather than stimulate rapid economic growth.[20] Indeed, the core mission of the stimulus is to stabilize the property sector because of its widespread impact on the rest of the economy.[21] The Politburo said as much in the readout of its late September meeting, pledging to stop the decline of the property market.[22]
Regarding implications for China’s oil demand, what is not included in the stimulus package is arguably more important than what is in it. The package does not include projects likely to strongly support oil demand such as large-scale infrastructure projects that featured in the investment-led stimulus Beijing began in November 2008 in response to the global financial crisis.[23] Also absent are many new housing construction projects, since Beijing’s focus is on the completion of unfinished homes and supporting sales, per the stimulus measures listed above and the Politburo’s statement that the government will strictly limit the construction of new housing projects.[24]
What Global Oil Market and Price Implications Could Result from China’s Slower Oil Demand Growth?
The slowdown ahead has implications for the oil market and oil prices. For world oil consumption to continue to grow at the historical one-plus million bpd per year rate, other countries/regions such as Africa, India, and Southeast Asia will have to achieve nearly all these gains. This is especially true given large markets such as the US and Europe may also be close to peak oil demand.
Some industry estimates, including OPEC’s, have total oil consumption increasing through the 2030s and beyond 2040, to over 120 million bpd.[25] Other agencies have demand approaching a peak between 2025 and 2030 or between 2030 and 2035[26] at a level of 105–108 million bpd, with the slowdown in China a key factor. Oil demand in 2024 is expected to average 102.5–103 million bpd,[27] meaning if the prior estimate of peak volume is correct, only about 2–5 million bpd of additional growth is expected.
This relatively limited total future growth would mean that the world is likely well supplied with oil over the coming decade. The OPEC-plus group of countries currently has 5–6 million bpd of spare capacity,[28] and non-OPEC-plus supply growth is expected to continue to rise over the coming years, led by the Americas (slowing in the US but increasing in Brazil and Guyana). This oversupply may lead to a much lower oil price range than that of the last few years—potentially in the $70s per barrel or lower. Conversely, if demand rapidly increases toward the 110 million bpd threshold or higher in the next 5–10 years, as estimated by OPEC for example, the market is likely to remain somewhat tighter and could support prices closer to $80-plus per barrel.
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