Greg Priddy
For many years, the outlook for the world oil market has rested heavily on China, as it has been by far the most significant driver of demand growth in this century. But now, twenty years after the landmark 2004 surprise, when Chinese demand reached over 3 million barrels per day year-on-year, stoked fears of scarcity and drove up prices, there is a growing consensus that China’s oil demand will soon peak. That does not necessarily mean that global demand will peak shortly thereafter, as it reflects the specifics of the policy context in China. Still, it makes it a lot harder to envision a period of lasting market tightening in the future, which many oil bulls and OPEC+ producers had predicted would take place in the mid-to-late 2020s.
The two largest state-owned oil companies in China, CNPC and Sinopec, both issued studies in December that showed that the demand for transportation-sector goods has already peaked, with total demand set to peak soon. Both expect full-year data for 2024, when released, to show declines in gasoline and highway diesel usage, which has been accelerated by the faster-than-previously-expected gains in sales of electric vehicles (EVs) and the increasing use of natural gas as an alternative fuel for heavy trucks. The only oil-based transportation fuels that are still growing are jet fuel and kerosene. Sinopec forecasts diesel use to fall by 5.5 percent in 2025 from 2024 levels and gasoline use to fall by 2.4 percent. Fully 22 percent of new heavy trucks sold in the first three quarters of 2024 used natural gas as a fuel, and EVs are expected to displace 15 percent of gasoline consumption in 2025 relative to where it would have been otherwise.
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