China's Oil Demand Faces Steepest Slowdown in Decades - What It Means for Global Markets
China, a key player in global demand, is experiencing a significant slowdown in oil consumption, marking the slowest growth in 15 years. Analysts at Bernstein highlighted a 2% year-to-date decline, with demand hitting its lowest point since 2009, excluding the COVID period.
This slowdown is part of a broader economic decline in China, as industrial and construction sectors weaken, further contributing to the drop in demand. The country's refining industry is also struggling, with lower run rates reflecting weak domestic demand for refined products.
The decline in domestic fuel sales, particularly diesel, gasoline, and kerosene, signals a broader economic slowdown. However, gasoline consumption has remained resilient, expected to plateau as electric vehicle adoption accelerates. Analysts predict a peak in gasoline demand within the next five years.
Real-time data on seaborne oil imports also paints a weak picture, with imports down by 9% year-on-year in August. Based on current trends, analysts project a 2-4% decline in China's oil demand for 2024, below industry expectations.
As China's economy faces structural challenges, including slowing industrial sector and reduced consumer spending, the global oil market is likely to feel the effects. With China historically driving more than 50% of net global oil demand growth, a slowdown in China's demand trajectory could have significant implications for oil prices.
Analysts believe that the "golden age" of China's oil demand is ending, with lasting implications for global oil markets. While some sectors may continue to support demand, the overall outlook for China's oil consumption points towards slowing growth and eventual decline.
In conclusion, the slowdown in China's oil demand is a key indicator of broader economic trends and could impact global oil prices. As an investor, it is essential to monitor these developments and adjust investment strategies accordingly to navigate the changing landscape of the oil market.