China’s diesel demand has faced significant challenges this year due to a combination of the ongoing property sector crisis and the growing adoption of liquefied natural gas (LNG) in trucking. This downturn is dampening the outlook for oil demand growth in the world’s largest crude importer, which has traditionally been a major driver of global demand.
Analysts predict that diesel demand in China will remain weak through the end of 2024. The latest estimates suggest that overall oil demand growth in China will be just under 3% for 2024, a decline from previous years. This is a stark contrast to the average annual growth of 4.6% over the past decade and last year’s significant rebound of 11.7% following the end of extensive COVID-19 lockdowns.
While gasoline demand appears to be stabilizing, diesel consumption is experiencing a notable decline. According to a Reuters survey, four out of five analysts forecast a decrease in diesel demand of between 2% and 7% in the latter half of 2024 compared to the same period last year.
The decline in diesel demand is attributed to weaker economic growth, ongoing issues in the property sector, and the increased use of LNG-fueled trucks. The shift to LNG-powered heavy-duty vehicles is particularly impactful as LNG has become more cost-effective compared to diesel. This transition is supported by the recent surge in LNG truck sales, driven by lower global and Asian LNG prices, which have dropped from the peak levels seen in mid-2022.
Looking ahead, the prospect of increased LNG supply, particularly from large expansion projects in Qatar post-2026, is expected to further boost the LNG truck market in China. Analysts are optimistic that the continued influx of LNG will maintain lower prices and further accelerate the shift away from diesel in the trucking sector.
Overall, the combination of economic pressures and the rise of alternative fuel sources is reshaping China’s oil demand landscape, with significant implications for global energy markets.
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