China’s oil demand dips, ticks down as economic ebb eases fuel imports

It also cut crude oil imports from Saudi Arabia, its second-biggest supplier, by 6.5 per cent over the two months.

For July’s overall crude imports, China reported a 3 per cent drop to 42.3 million tonnes, the figure’s lowest level since September 2022. Country-specific trade data for the month has not yet been released.

“[The general drop] stems from weak construction and manufacturing activity during the period, and is also mirrored in similarly weak demand growth for other commodities,” said Matthew Sherwood, lead commodities analyst at the Economist Intelligence Unit.

We can only assume that the sharp drop in Russian oil imports is related to the sharp rise in imports from Malaysia

Matthew Sherwood, Economist Intelligence Unit

Although the decline in imports from Russia is driven by reduced overall demand, it remains significant that the dip is larger than the overall decrease in China’s total oil consumption, Sherwood said.

However, imports from Malaysia are bucking the trend with a 45.1 per cent month-on-month surge in May.

Sherwood said that Malaysia’s crude oil exports to China, which have surpassed its production capacity, could be “excess production” from Russian stocks being diverted to China.

“There’s no way of confirming that for sure, but it is hard to explain the Malaysian numbers otherwise,” he said. “We can only assume that the sharp drop in Russian oil imports is related to the sharp rise in imports from Malaysia.”

However, Russia will persist in implementing any measures necessary to circumvent Western sanctions over the war in Ukraine, and China will continue to meet some of its oil needs with less expensive Russian crude, Sherwood added.

China’s economic activity has seen signs of deceleration, with Thursday’s data indicating further declines in consumption and investment following 4.7 per cent year-on-year growth reported in the second quarter, lower than expected.

The slowdown has led the International Energy Agency, the industrial watchdog, to cut its forecast for global oil demand in its monthly report.

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“Weak growth in China following the post-Covid surge of 2023 now significantly drags on global gains,” the Paris-based agency said on Tuesday, estimating global oil demand would increase by fewer than 1 million barrels per day this year and in 2025.

Besides cooling economic momentum, China’s fast-growing appetite for clean energy was also cited as a reason for the dip in oil demand, the Organisation of the Petroleum Exporting Countries (Opec) said on Monday.

“Headwinds in the real estate sector and the increasing penetration of liquefied natural gas trucks and electric vehicles are likely to weigh on diesel and petrol demand,” it said.

Opec reduced its forecast for global oil demand growth this year from 2.2 million barrels per day to 2.11 million barrels per day, due to a reduced thirst for oil in China.

But the bloc was still optimistic about the demand prospects of the world’s second-largest economy, saying steady growth and an upswing in travel will increase fuel needs.

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