China’s oil demand will likely stay tepid for months ahead, at least until the middle of 2026, according to private refiner Hengli Petrochemical.
“It’s difficult to find a very bright spot unless the government rolls out new policy at beginning of next year,” Janet Kong, chief executive officer of the Singaporean unit of the refiner, told Bloomberg on the sidelines of the Financial Times Commodities Asia Summit in Singapore.
China’s demand for road transportation fuels such as gasoline and diesel has been hit in recent months by the surge in registrations of electric passenger cars and LNG-fueled heavy-duty vehicles.
China’s state-controlled energy giants have started to admit that the so-called new energy vehicles – the ones not running on refined petroleum products – are eating up domestic road fuel demand, which has already peaked.
China National Petroleum Corporation (CNPC), the controlling shareholder of PetroChina, acknowledged as much in its annual outlook in April.
While stronger economic growth than previously expected and booming demand for petrochemicals will lift China’s oil demand by 1.1% this year, consumption of transportation fuels has peaked, CNPC’s think tank, Economics and Technology Research Institute (ETRI) said.
However, the petrochemicals sector is grappling with overcapacity, due to the massive buildout of capacity in China.
According to Hengli’s Kong, China’s policies in the coming months will be crucial for shaping next year’s oil demand trend.
Analysts and traders will be watching closely how the authorities will approach China’s economic stimulus and crude import quotas for private refiners. If they decide to hike quotas and move more decisively to support China’s economy and private consumption, oil demand could start to recover at some point next year.
Despite the apparent peak in China’s road fuel demand, the world’s biggest crude oil importer remains a crucial factor for shaping global oil demand trends and a key driver of oil prices.
By Tsvetana Paraskova for Oilprice.com
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