For the first time in twenty years, China is no longer seen as the driving force behind global crude oil demand, a shift that has caught many industry professionals off guard at the APPEC oil conference in Singapore this week. China’s economic slowdown, marked by a struggling property market and weakened consumer confidence, combined with structural shifts such as an aging population, the transition to cleaner energy, and a reduced focus on large-scale infrastructure projects, is impacting global oil markets.
The implications for crude traders and analysts are significant. Janet Kong, CEO of Hengli Petrochemical International Pte., one of China’s largest private refiners, noted, “I’ve had the discussion internally with my traders. I asked them one question — how long have you been trading? They’ll say 10 years. My reply is, you haven’t really traded a world where China is not a bullish factor.”
Historically, China’s status as the world’s largest oil importer has been a major support for crude prices and has opened up numerous business opportunities for traders globally. However, the country’s tolerance for lower GDP growth—potentially falling short of this year’s 5% target—poses challenges for sustaining this trend.
A survey of ten analysts and traders at the Asia Pacific Petroleum Conference (APPEC) revealed that China’s oil consumption is expected to increase by no more than 300,000 barrels per day by 2025, significantly below the latest forecasts from the International Energy Agency (IEA) and the Organization of Petroleum Exporting Countries (OPEC). For this year, a modest expansion of 200,000 barrels per day is anticipated.
Factors contributing to this slowdown include higher adoption of electric vehicles, the growing use of liquefied natural gas (LNG) trucks, and government restrictions on crude imports and fuel exports. Additionally, China faces limited storage capacity for expanding its strategic oil reserves.
Energy Aspects Ltd. analysts, Amrita Sen and Livia Gallarati, commented, “From a structural perspective, China now looks unlikely to be the behemoth for oil demand and perhaps even for other commodities that it once was. We remain confident that the government will not allow economic growth to collapse, but growth will no doubt be lackluster for the foreseeable future.”
Conference attendees, including Kong, highlighted the evolving nature of oil demand. A substantial portion of China’s oil consumption, approximately 5 million barrels per day, is used as chemical feedstocks for products such as fibers. As road transport shifts towards greener alternatives, the proportion of oil used for these purposes may increase. However, these products have a longer “half-life” than fuels, which could result in a reduced volume of crude being refined over time.
The economic challenges facing China have cast a shadow over the APPEC conference, Asia’s largest oil event. With Brent crude priced around $71 and limited signs of a swift economic recovery, traders and refiners are preparing for reduced profits.
Despite these issues, China’s refining capacity continues to grow. Recent expansions at China Petrochemical Corp.’s Zhenhai and Cnooc Ltd.’s Daxie refineries, along with a new facility by Shandong Yulong Petrochemical Co., will add a total of 740,000 barrels per day. However, traders and analysts predict that processing rates will remain under 70%.
While some experts, including Trafigura Group Chief Economist Saad Rahim, remain optimistic about China’s fossil fuel consumption, noting the continued addition of 8 to 9 million new combustion engine vehicles annually, others foresee a gradual slowdown in demand growth. Sri Paravaikkarasu, director of market analysis at Phillips 66 International Trading, suggested that if China’s economy improves, discretionary driving might increase, but a slower growth trajectory is expected.
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