China’s crude oil imports could remain permanently depressed, energy analysts have predicted, citing demand destruction resulting from the electrification of transport in the world’s largest oil importer.
“Consumer behavior can be a bit sticky,” according to Lin Ye, vice president of oil markets at consultancy Rystad Energy, as quoted by Bloomberg. “For those who shifted to electric cars during the war, there might be little reason to switch back unless fuel prices become substantially cheaper.”
Interestingly, EV sales in China, which is the biggest market for this type of vehicle, have been on a decline since the start of the year because Beijing has been phasing out subsidies it used to spur adoption. In May alone, EV sales in China fell by 9%. Bloomberg, however, cited figures showing that EVs accounted for 42% of all car sales in China in May, up from 38% in March. It is worth noting here that overall car sales in China declined in May by a sizable 22.3%.
Still, Rystad Energy has estimated that China has seen oil demand destruction of between 200,000 barrels daily and 600,000 barrels daily from pre-war levels, and that demand may not recover by the end of this year. Energy Aspects, meanwhile, sees a permanent oil demand loss of 300,000 barrels daily for China.
Another consultancy, FGE NexantECA, expects China to book an oil import drop of as much as 3.3 million barrels daily for the current quarter. The company cited a number of factors determining this, including lower refinery run rates, the end of stockpiling season, and Beijing’s ban on fuel exports, which has boosted domestic fuel supply and reduced demand for fresh feedstocks.
Others, such as Kpler, however, expect Chinese refiners to start ramping up imports again at some point as war-related price hikes forced them to dip into stockpiles, which would need to be replenished to keep the country’s oil supply shock-absorbent cushion in good shape.
By Irina Slav for Oilprice.com
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