#China #CrudeOil #OilImports #OilPrice #Energy #MiddleEast #Hormuz #OPEC #OilGas #Economy
Has China really entered a period of long-term decline in oil demand or is this just a strategic move to wait for oil prices to plummet before buying on a large scale?
China is creating one of the biggest variables in the world oil market as crude oil imports have dropped sharply in just a few months. After many years of maintaining an average level of about 11.5 million barrels per day, the amount of imported oil from April until now is only about 8 million barrels per day. In June alone, import volume was only about 40% compared to the period before the Middle East conflict broke out.
This move has contributed to reducing pressure on global supply, helping oil prices not increase as sharply as many forecasts even though the Middle East region continuously faces geopolitical risks.
One of the most important reasons is that fuel consumption demand in China is changing rapidly. Electric and hybrid vehicles accounted for 62% of new car sales in June, a record high. This shows the electrification of transportationis happening strongly, especially in big cities.
However, that does not mean gasoline demand will disappear immediately. Currently, about 87% of vehicles in circulation in China still use internal combustion engines, so traditional fuel consumption is still very large.
Indicators Before the Current Conflict
Crude oil imports About 11.5 million barrels/day About 8 million barrels/day
Import reduction in June was 100%, about 40% compared to before the war
Percentage of electric and hybrid vehicles sold Lower than 60% 62% of new car sales
Gasoline vehicles in circulation account for the majority of about 87% of the total number of vehicles
Another structural change comes from the freight sector. The Chinese government is promoting truck electrification with the goal that by 2030, about 80% of high-density short-haul routes will use electric vehicles. This is the factor that puts diesel demand at risk of decreasing much faster than previous forecasts.
According to Rystad Energy, gasoline demand in China may decrease by about 6.6%, while diesel will decrease by about 6.9%, nearly double the forecast before the Middle East conflict broke out.
Besides the change in transportation, China's economy is also adding pressure on oil demand. Crisis of immobilityProlonged production weakens construction activities, leading to a significant decrease in fuel demand for machinery and transportation. The petrochemical industry is also under pressure as consumption slows and must compete with raw materials derived from coal.
One factor that is very important but almost impossible to measure accurately is China's strategic oil reserves. The size of reserves is considered a state secret and Beijing does not release official figures. Last year, the country took advantage of buying large amounts of oil when Brent prices fluctuated around 58 to 83 USD per barrel to enhance energy security.
Currently, Brent price has increased to about 85 USD per barrel, causing many experts to say that China does not have the motivation to store strongly again. If prices fall below about 70 USD per barrel, the likelihood of the country restarting a large-scale oil purchase program will increase significantly.
Expected Import Scenario
The Middle East is stable, with no new storage of 8 to 9 million barrels/day
Launch a strategic reserve program of 9.5 to 11 million barrels/day
Another factor that will determine import trends is China's fuel export policy. If Beijing continues to relax export quotas on gasoline, diesel and aviation fuel, manufacturersOil refineries will have the incentive to increase capacity and import more crude oil. On the contrary, if export restrictions are tightened again, oil import demand will likely continue to remain low.
In the short term, China remains the biggest variable in the global oil market. As long as this country changes its reserve strategy or adjusts its fuel export policy, the world supply and demand balance can reverse very quickly, directly affecting oil prices, transportation costs and inflation in many economies.
#China, #CrudeOil, #OilImports, #OilPrice, #Energy, #MiddleEast, #Hormuz, #OPEC, #OilGas, #Economy, #EnergySecurity, #PetroTimes
