Sudden Covid lockdowns will weigh on China’s oil demand this year as people avoid mass travel around holidays, dragging fuel consumption in the world’s top crude importer down for 2022 for the first time in two decades, analysts say.
Travel by car or plane during the local holidays in September and October is expected to remain low due to fear of being locked down in flash mobility restrictions under China’s “zero Covid” policy.
As a result, demand for gasoline, jet fuel, and diesel in China could drop by 380,000 barrels per day (bpd) this year compared to 2021, Energy Aspects analyst Sun Jianan told Reuters.
Chinese consumption of those fuels increased by 5.6% - or 450,000 bpd - annually in 2021.
But this year could see the first annual drop in demand in China since 2002, which would be a “watershed moment” for the oil market, according to the Energy Aspects analyst.
Oil demand in China has been soft since the spring when lockdowns returned. The country’s economic activity is also showing signs of weaker growth while the property market continues to be a concern. Worries about China’s oil demand, coupled with fears of a European recession, have been weighing on oil prices for most of the past few weeks.
The latest provisional data out of China is not encouraging, either.
China’s crude oil imports in August were 1.1 million bpd lower than the year-ago period and its exports were lower than expected, the latest data suggests. China imported 9.35 million bpd of oil last month, according to energy analytics provider OilX. That is half a million barrels per day higher than imports in July but 1.1 million lower than imports in August 2021.
For January to August, China’s crude oil imports averaged 9.92 million bpd, which was down by 4.7% compared to the same period of 2021, per customs data from this week cited by Reuters.
By Tsvetana Paraskova for Oilprice.com