China's Oil Demand Growth Expected to Drop by Half of 2019 Levels, Eurasia Group Says

China's oil demand growth this year is expected to be significantly lower than pre-Covid 2019 levels, according to the Eurasia Group. The slowdown in key segments of the world's second-largest economy is contributing to this decline.

Challenges in Construction and Auto Sectors

The country is unlikely to return to its previous model of oil-intensive economic growth in 2024. The construction and auto sectors, which are key drivers for oil demand, are now showing signs of fatigue, as noted by the risk consultancy.

Projected Demand Growth

The consultancy anticipates demand growth to be in the range of 250,000 bpd to 350,000 bpd for this year, which is less than half of the levels observed in 2019. It is projected that demand growth will not return to the levels seen between 2015 and 2020, signaling a significant shift in the market.

Factors Impacting Future Growth

Even if China's property sector experiences a recovery, future growth is deemed unattainable due to the country's soaring debt levels, declining demographics, and reduced GDP growth expectations, according to the consultancy. This sets a challenging outlook for the oil industry.

Shift in Global Oil Demand

China is expected to lose its position as the primary driver for global oil demand through 2030, with the International Energy Agency highlighting India as the successor in a recent report.

Record Oil Consumption in 2023

Chinese oil consumption reached an all-time high of 16.03 million barrels per day last year, driven by a 1.2 million barrels per day growth, largely attributed to taking advantage of low oil prices and increased domestic passenger travel levels post-Covid restrictions.

Outlook for 2024

However, the supporting factors that contributed to the record demand growth in 2023 are diminishing this year. JPMorgan expects an increase of 530,000 barrels per day in 2024, as China continues on the trajectory of a "low-quality growth."

Impact on Fuel Demand

The country's economic slowdown is impacting growth in gasoline and diesel demand, with the electrification of China's auto fleet further constraining gasoline demand, as noted by Rapidan Energy's Director of Refined Products Linda Giesecke while speaking with CNBC.