BAKU, Azerbaijan, September 15. According to the International Energy Agency (IEA), China's oil demand continues to weaken, with a year-on-year (y-o-y) drop of 280,000 barrels per day (kb/d) in July, Trend reports.
This marks the fourth consecutive monthly contraction and the largest decline since August 2022, when the country was under strict lockdown. The slowdown in demand has been most pronounced in industrial sectors, with gasoil and naphtha leading the downturn.
In July, gasoil consumption fell by 310 kb/d y-o-y to 3.3 million barrels per day (mb/d), the lowest level since February 2023. Naphtha deliveries also dropped by 50 kb/d compared to the previous year. The contraction in industrial fuel usage reflects broader economic challenges, as China’s economic data remains weak. Consumer confidence is low, particularly due to a faltering housing market that shows no signs of recovery. In July, new home prices fell by 4.9% y-o-y, the fastest pace in nine years, while property sales by major developers plummeted by 20%.
Industrial production, while still showing some resilience earlier in the year, is also slowing. In July, it increased by just 5.1% y-o-y, the slowest growth since April, and fell short of expectations. Manufacturing Purchasing Managers' Indices (PMIs), which began to show weakness in the second quarter of 2024, continue to decline, indicating further industrial slowdowns ahead.
As domestic consumption falters, Chinese producers have increasingly turned to export markets, slashing prices in an effort to boost sales abroad. However, many of China’s trading partners are pushing back, introducing trade barriers and launching anti-dumping probes to protect their own industries. The IEA warns that these external pressures are further complicating China's economic recovery.
China’s ambitious 5% GDP growth target for 2024 is now at risk, with analysts forecasting growth closer to 4.8%, and a further slowdown to 4.5% expected in 2025. The economic challenges are compounded by growing competition from LNG-powered trucks, which could displace around 150 kb/d of gasoil demand this year, according to the IEA.
The Chinese government has yet to announce any major policy support measures to address these issues, leaving the country’s oil demand outlook uncertain. As economic headwinds continue to build, the IEA suggests that China’s oil consumption may face further downward pressure in the coming months unless significant intervention occurs.