China’s central planning agency is urging refiners to reduce fuel production and shift focus toward petrochemicals, according to its annual report.
The National Development and Reform Commission (NDRC) stated, “We will guide the petrochemical industry toward fine chemicals by cutting the output of refined petroleum products, boosting the production of chemical products, and improving quality,” as reported by Bloomberg.
The country’s demand for fuels has been impacted by the growing popularity of electric vehicles (EVs) and the rise of LNG-powered trucks. Sinopec, China’s state-run energy company, noted that diesel demand might have peaked in 2019, while gasoline demand likely reached its highest point in 2023.
The International Energy Agency (IEA) also suggests that fuel demand in China may have already peaked. The IEA reported that in 2024, China’s daily consumption of gasoline, gasoil, and jet fuel averaged 8.1 million barrels, 200,000 barrels per day (bpd) lower than in 2021 but slightly higher than 2019 levels.
This trend of weaker oil imports this year seems to support the idea of peak oil demand in China, the world’s largest importer. However, the drop in imports may not be due to reduced demand but rather higher prices. The Biden administration’s sanctions on Russia have contributed to the rise in prices.
The sanctions have disrupted the supply of ESPO crude, a popular choice for Chinese refiners. The sanctions targeting Russian oil and the shadow fleet of tankers have limited the availability of non-sanctioned vessels to transport the crude to China. As a result, transportation costs have increased, reducing demand for the crude and ultimately leading to lower oil imports.
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