China’s oil and gas demand outlook has weakened materially in 2026 as elevated oil prices, slower economic activity, and accelerating energy transition trends weigh on consumption.
That’s what analyst at BMI, a unit of Fitch Solutions, said in a BMI report sent to Rigzone by the Fitch Group recently.
“China crude imports are likely to remain restrained without a significant softening in prices and a return of higher tanker transits through the strait of Hormuz,” the analysts warned in the report.
“The resurgence in Brent prices as the U.S.-Iran conflict continues into September will reduce crude imports again with drawdowns of stocks and lower refining runs likely to return in the month ahead without a peace deal,” they added.
The analysts highlighted in the report that they were keeping their Brent crude price forecasts unchanged this month, “with Dated Brent averaging $86 per barrel and Brent futures averaging $83 per barrel in 2026”. For 2027, the analysts revealed in the report that they continue to forecast both contracts at $71 per barrel.
“Our core assumptions remain largely intact,” the analysts highlighted in the report.
“We still expect the U.S. and Iran to reach a preliminary agreement in Q3 2026 that would reopen the Strait of Hormuz, enabling a broad normalization of regional crude exports and production over Q4 2026 and into early 2027,” they added.
China Customs Statistics
In the BMI report, the BMI analysts said China’s customs statistics showed a sharp increase in crude oil imports in July 2026, “with volumes rising to 8.63 million barrels per day, up 22.2 percent month on month”.
“The announcement of a U.S.-Iran ceasefire and the launch of negotiations on a memorandum of understanding helped ease tanker bottlenecks that had constrained shipments in June, supporting a rebound in crude tanker transits and a decline in oil prices,” they added.
“However, renewed hostilities and limited progress towards a lasting peace agreement have recently slowed crude flows and pushed oil prices higher, reducing the likelihood of a sustained return to pre-conflict import levels,” they warned.
The BMI analysts went on to state in the report that, according to Sinopec’s interim results, which were published in August 2026, China’s oil and gas market “faced a more challenging operating environment in H126 as elevated and volatile crude prices weighed on energy demand”.
“Brent crude prices surged in late Q126 amid the U.S.-Iran conflict before moderating in Q226, remaining more than 29 percent higher y-o-y over the period,” the analysts pointed out in their report.
“Higher oil prices, combined with accelerating substitution from alternative energy sources, weakened refined fuel consumption, which fell by 8.6 percent y-o-y,” they added.
“Diesel demand recorded the largest decline, down 11.5 percent y-o-y, while gasoline consumption contracted by 7.9 percent y-o-y. Jet fuel was the only major refined product to post growth, increasing by 1.3 percent y-o-y, supported by holiday travel and the continued recovery of international air traffic,” they continued.
The BMI analysts also outlined that natural gas demand growth in China “also slowed markedly, with consumption rising by just 1.6 percent y-o-y, highlighting softer underlying demand conditions across China’s energy sector”.
PetroChina “reported a similarly weak performance in H126”, the analysts pointed out in the report.
“Crude throughput fell by 5.1 percent y-o-y to 655 million barrels, while refined fuel production declined by 8.8 percent y-o-y to 54.35 million tons, from 59.57 million tons in the corresponding period of 2025,” they highlighted.
“Despite lower production volumes, PetroChina’s domestic refined products market share increased by 0.2 percentage points y-o-y, suggesting that consolidation is occurring within a contracting fuels market,” they added.
Fuel Demand Outlook
The BMI analysts revealed in the report that they had revised down their fuel demand outlook for China “following weaker than expected refined fuel consumption data”.
“We now forecast total refined fuel demand to contract by 8.0 percent in 2026, compared with our previous forecast for a 4.5 percent decline, bringing average demand to 15.72 million barrels per day for the year,” they noted.
“Sinopec attributed weaker fuel demand to elevated oil prices and the continued substitution of conventional transport fuels by alternative energy sources,” they added.
“Structural demand headwinds remain significant, with rising electric vehicle penetration and growing adoption of LNG-powered heavy goods vehicles continuing to displace gasoline and diesel consumption,” the continued.
The analysts pointed out in the report that Russia remains China’s largest source of crude oil imports in 2026, “with its year to date market share rising to 23.9 percent, compared with 17.9 percent in 2025”. Brazil and Indonesia have also increased their shares of China’s crude import mix, the report revealed.
“By contrast, imports from key Middle Eastern suppliers, including Iran, Iraq, the UAE, and Saudi Arabia, have lost market share as disruptions to regional energy trade have constrained cargo availability and altered trade flows,” they added.
China LNG
China’s LNG import demand continued to weaken through July 2026 as slower natural gas consumption growth and rising domestic gas production reduced the need for imported cargoes, the BMI analysts stated in the report.
“Based on import data available through July, we estimate LNG imports will decline by 4.6 percent in 2026,” they revealed.
“While this would mark a second consecutive annual contraction, it would represent a slower rate of decline than the 13.6 percent fall recorded in 2025,” they added.
The BMI analysts noted that the reduction in LNG imports primarily reflects weaker underlying natural gas demand.
“We forecast total natural gas consumption to contract by 1.0 percent in 2026,” they said.
“Although increased coal-fired and renewable power generation has displaced some gas demand in the power sector, gas-fired power demand is still expected to record modest growth over the year,” they added.
“Industrial consumption is likely to remain the principal drag on overall gas demand, with weaker industrial activity continuing to weigh on consumption across energy-intensive sectors,” they continued.
Global Oil, Gas Consumption
According to the Energy Institute’s (EI) latest statistical review of world energy, which was published earlier this year, China was the world’s second biggest oil consumer and the world’s third biggest natural gas consumer in 2025.
The review showed that China consumed 17.360 million barrels of oil per day last year. This figure marked a 2.7 percent year on year increase and 16.8 percent of total oil consumption in 2025, the report pointed out. From 2015 to 2025, China’s oil consumption has grown by an average of 3.9 percent every year, the review showed.
The EI review outlined that China was the third biggest consumer of natural gas in 2025, with 441.9 billion cubic meters. According to the review, this figure marked 10.6 percent of total natural gas demand last year and represented a year on year growth figure of 2.3 percent for China. From 2015 to 2025, China’s natural gas demand has increased by an average of 8.5 percent every year, the review outlined.
Total global oil consumption came in at 103.039 million barrels per day in 2025, marking a 1.3 percent year on year growth rate, the EI review showed. Global oil demand has grown by an average of 1.0 percent every year from 2015 to 2025, the review highlighted. Total global natural gas demand came in at 4,186.0 billion cubic meters last year, the review revealed. This demand increased by 1.6 percent year on year, according to the review, which pointed out that, from 2015 to 2025, global natural gas consumption has grown by an average of 1.9 percent every year.
To contact the author, email
