China reaches refined oil demand peak

China, the world’s second biggest oil consumer, has officially hit its peak. According to the China National Petroleum Corporation's (CNPC) Economics & Technology Research Institute, the country’s refined oil consumption maxed out in 2023 at 399 million metric tons (roughly 8mn bpd) and is set to decline by 1.3% in 2024.

For an economy that’s been a relentless driver of global oil demand for decades, this news is striking.

As for the reasons behind the shift, they can be chalked up in part to electric vehicles (EVs), which are taking over Chinese roads. By 2035, half of the country’s car fleet is expected to be EVs, so some are predicting.

This, combined with a rise in alternative fuels for trucks, is expected to slash demand for gasoline and diesel by as much as 50% from 2023 levels--if CNPC predictions ring true.

Jet fuel, however, appears to be bucking the trend with a projected 70% growth, thanks to a booming aviation sector.

What does this mean for crude imports? They’re also on the decline. In 2024, China’s crude oil imports are expected to drop to 544 million tons, calling into question the country’s reign as the global oil market’s growth engine.

Despite this decline in demand growth, China still accounts for a hefty quarter of global crude imports.

Looking further out, CNPC predicts a 25-40% drop in overall refined products consumption by 2035. Yet not all is bleak for oil. Demand for petrochemical feedstocks, such as for naphtha and LPG, is set to surge 55%, fueled by China’s expanding plastics and chemical industries.

It's an evolution. For crude oil producers, the shift is a clear signal that adaptation and innovation is in order.