China’s oil demand gradually recovers amidst deteriorating geopolitics

In the second half of 2020, China's oil demand is forecast to be 120,000 b/d lower year-on-year, or 14.1 million b/d, according to ESAI Energy's newly released China Watch report. The recovery of oil demand is more gradual than recent data suggest. Furthermore, and increased tensions with U.S. and India could lead to trade disruptions, negatively affecting oil demand for the rest of the year. This has implications for the recovery of oil demand and prices.

The report puts in perspective recent signs of economic expansion and strengthening oil demand in China. After a 6.8 percent GDP decline in the first quarter, industrial output and power generation have grown year-on-year since April. The PMI index, at 50.9 in June, remained in expansion territory for the fourth consecutive month. Boosted by generous subsidies, car sales grew by 15 percent from 2019 levels in May. At the same time, highway freight and passenger traffic were at 80 and 50 percent of 2019 levels, retail sales lagged 2019 levels by 3 percent, and May car sales were still weaker than 2018 levels. ESAI Energy warns that this latter set of indicators are evidence that oil demand is much weaker than implied demand for May suggest.

Meanwhile, China's deteriorating geopolitics raises the prospect of disruptions to trade. In response to Beijing's new national security law in Hong Kong, Washington started to revoke Hong Kong's special status, which could damage the city's role as a global financial hub where many Chinese firms obtain foreign capital. In addition, the recent border clash with India, the destination of 3 percent of China's 2019 exports, triggered a ban on Chinese apps and has undermined bilateral trade and investment.

“In this unprecedented time, the outlook for Chinese oil demand is far from bullish,” points out Yao Wu at ESAI Energy. “Data indicate China's apparent oil demand suggest oil consumption reached a record high in May. This apparent demand includes considerable unreported stock-building, according to ESAI Energy analysis, which means actual oil consumption was at least 1 million b/d lower. On top of that, worsening international relations add downside risk to the economy that has bearish implications for China's oil consumption.”

New service from OilVoice
Trip Shepherd is for companies who need to track their staff in areas of risk.
It's free to use, so we invite you to try it.

Visit source site

ChinaOiloil demandEnergy

More items from jwright

2.7 million b/d US Crude Oil Pipeline Capacity Delayed in 2021

Pipeline projects in the US that were slated for start-up in 2021 are facing huge challenges from an uncertain demand outlook, lengthy court battles and regulatory review. ESAI Energy's recent North America Watch notes that while some projects already under construction are moving forward, about 2 ...

Jake Wright

Posted 16 days agoPress > DAPLOilDakota Access Pipeline +3

After the Russian Middle Distillate Flood

After Russia flooded the global middle distillate market in the second quarter, Russia's surplus will recede to more typical levels, according to ESAI Energy's recently published CIS Watch . Early in the second quarter, Russia's extraordinary surplus of roughly 1 million b/d of diesel and jet fue ...

Jake Wright

Posted 17 days agoPress > RussiaMiddle distillatejet fuel +1

Shale Could Contract by 1.0 Million b/d Within the Year

As a price-elastic source of supply, US shale production will respond relatively quickly to the steep drop in oil prices. Already US E&Ps are reporting further reductions to their 2020 spending guidance and cutting back on planned drilling activity. A new-normal is here, with fiscal discipline and ...

Jake Wright

Posted 4 months agoPress > ShaleOilPrice War +1

ESAI Energy Introduces "Green Energy Trends"

ESAI Energy introduces its new publication,  Green Energy Trends , that will build on and replace their  Global Biofuels  report. The new publication will highlight the market impact of policies and other developments associated with climate change and combating its effects. Meanwhile, the publicat ...

Jake Wright

Posted 6 months agoPress > Climate Changeenergy transitiongreen energy +3


On Monday, the 30th, ESAI Energy wrote that conflict between the U.S. and Iran is a military as well as economic contest and that oil facilities in the region remain at risk. Last night's U.S. attack, killing the leader of the IRGC Quds Force, was described as pre-emptive self-defense designed to ...

Jake Wright

Posted 7 months agoPress > U.S.IranIraq +2
All posts from jwright