NEW YORK (Reuters) — China’s diesel demand fell by 11% year-on-year to 3.9 million barrels per day in June, marking the largest drop in percentage terms since July 2021, according to a report from the U.S. Energy Information Administration (EIA) released Thursday.
Why It Matters
China’s weakened fuel demand has been a major concern for global oil markets this year. Analysts had anticipated that China, the world’s second-largest economy, would continue driving growth. However, this decline has caused uncertainty among investors and market participants.
The Organization of Petroleum Exporting Countries (OPEC) adjusted its 2024 oil demand forecast downward this week, citing reduced expectations for China. This marks the first revision since the forecast was published over a year ago. Similarly, the International Energy Agency (IEA) in Paris has lowered its 2025 forecast, attributing the change to China’s sluggish economic performance.
Background
Last year, diesel consumption in China hit an all-time high. However, demand has sharply declined since the second quarter of this year, according to the EIA. The drop is primarily due to two main factors: a struggling property sector slowing economic growth and the increasing use of liquefied natural gas (LNG) as a diesel substitute in heavy-duty trucks.
The EIA noted, “The reduction in diesel use is partly due to the slowdown in economic activity in the construction and property sectors. Additionally, a small but growing portion of China’s trucking fleet is switching from diesel to LNG.”
By the Numbers
Sales of LNG-powered trucks surged by 307% to 152,000 units 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.
Amid these shifts, Chinese refineries have faced challenges. Official data shows that oil refinery output fell by 6.1% in July compared to the previous year, marking a fourth consecutive month of decline.