NEW YORK (Reuters) – China’s diesel demand fell 11% year on year to 3.9 million barrels per day in June, the biggest percentage decline since July 2021, the U.S. Energy Information Administration said on Thursday.
WHY IT’S IMPORTANT
Sluggish fuel demand in China has weighed heavily on oil markets this year, unnerving market participants who had expected the world’s second-largest economy to remain a growth engine.
The Organization of the Petroleum Exporting Countries this week lowered its oil demand forecast for 2024, citing softer expectations for China, the first cut since the outlook was published more than a year ago. The Paris-based International Energy Agency lowered its forecast for 2025, also citing a weak Chinese economy.
CONTEXT
Diesel consumption reached a record high in China last year, but demand has fallen sharply since the second quarter of this year, according to the EIA.
The slump is largely due to two factors: the country’s ailing real estate sector has slowed economic growth; and liquefied replaces diesel in heavy-duty trucks, the EIA said.
“Aside from reduced use of diesel due to slowing economic activity in the construction and real estate sectors, a small but growing share of China’s truck fleet is using LNG instead of diesel as fuel,” the EIA said.
BY THE NUMBERS
Sales of LNG trucks rose 307% to 152,000 last year, according to data from Chinese information provider CV World. Consultancy FGE estimates that LNG will replace 110,000 to 120,000 barrels per day of diesel demand in China this year and next.
Chinese refiners have struggled against this backdrop. According to official data, oil refinery output fell 6.1% in July from a year ago, for the fourth month in a row.
