The global oil market’s euphoria at China’s reopening has shifted to a realization that righting the economy after three years of pandemic restrictions is going to be a much harder slog than people first thought.
China is the world’s biggest buyer of crude oil, and while imports have rebounded this year, demand on the ground suggests a far more muted recovery. The economy has stalled in recent months, and forecasters who touted a swift return to $100 a barrel earlier in the year have gone decidedly quiet.
Transport demand accounts for more than half of the nation’s oil consumption, with diesel the largest part of that. About 20% is processed by the petrochemicals industry into plastics and consumer goods. Power generation, mining, agriculture and construction make up the rest.
As China switches to stimulus mode to revive growth, here’s a rundown in five charts of the challenges to consumption it faces as the first half of the year draws to a close.
Quieter Streets
People hit the road after Beijing abandoned its Covid Zero policies at the end of last year, lifting congestion levels in the big cities. That’s tapering off now as citizens return to more usual routines, and watch their spending as the economy slows.
Lower Freight
China’s industrial recovery has fared worse than consumer-facing sectors and trucking activity hasn’t really picked up. Including a steep drop at the start of the year, when Covid was allowed to rip through the country, the daily volume of trucks ferrying goods to and from factories and construction sites has averaged 6.1 million in 2023, compared to 7 million last year.
Losing Steam
Other energy products are also feeling the pinch from a weaker manufacturing sector. The price of natural gas carried on trucks to power factories that produce items like glass and ceramics has dropped to near a two-year low.
Fewer Flights
Chinese jet fuel demand was supposed to balloon as people took to the skies to celebrate their newfound freedom. But progress in unwinding years of travel restraints has been slower than expected. Geopolitical tensions — including disruptions to flights caused by the war in Ukraine — mean that China is still relatively isolated, especially from the west.
International flights from China are at only 39% of pre-pandemic levels, according to data from travel platform Flight Master. For trips to the US, the figure is just 6.6%, after the two countries capped direct weekly flights at 12 apiece. BloombergNEF expects demand on the route to pick up later in the year if the restrictions are eased; in the meantime, holidays to Thailand will make the biggest contribution to China’s jet fuel consumption.
Swollen Stockpiles
China has been on a crude oil buying spree as refiners bet on a quick return to downstream demand. That hasn’t happened and all the extra oil is now accumulating in storage tanks. Onshore inventory is near a two-year high, made worse by seasonal maintenance at refineries, suggesting that future imports could moderate from here.
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