China’s Economic Slowdown Impacting Oil Demand Growth
A recent report from Eurasia Group suggests that China’s oil demand growth in 2024 may only reach half of the levels seen before the Covid-19 pandemic in 2019. This slowdown in demand growth is primarily due to challenges faced by key sectors like construction and auto manufacturing, both of which are major drivers of oil consumption in the country.
According to the consultancy, China is unlikely to return to its previous model of oil-intensive economic growth this year. The demand growth is expected to be around 250,000 to 350,000 barrels per day, significantly lower than the levels seen between 2015 and 2020. This shift indicates that the era of China being the primary source of incremental fuel demand growth for the global oil industry may be coming to an end.
Rising debt levels, declining demographics, and reduced GDP growth expectations in China are contributing to this slowdown in demand growth. Even if the property sector in the country recovers, it is unlikely that China will see the same level of growth as before the pandemic. As a result, the International Energy Agency predicts that India will overtake China as the main driver of global oil demand by 2030.
In 2023, Chinese oil consumption reached an all-time high of 16.03 million barrels per day, driven by increased domestic passenger travel levels after Covid-19 restrictions were lifted. However, analysts project a more modest growth of 530,000 barrels per day in 2024 as China continues on a path of “low-quality growth.”
The shift towards electrification in China’s auto fleet is also contributing to the slowdown in gasoline demand growth, according to experts. It is clear that the landscape of oil demand growth in China is changing, and the country’s economic slowdown is having a significant impact on the industry.