China’s crude oil imports saw a decrease last year, marking almost the first time in two decades. Experts from the Chinese Communist government admit that China’s oil consumption is expected to drop again this year compared to the previous year. As China accounts for a significant portion of global oil demand growth, any decline in its demand would have ramifications on the global market.
On January 21, a high-end Chinese government think tank, the China Petroleum Economic and Technological Research Institute under the Chinese National Petroleum Corporation, released the “2024 Report on the Development of the Domestic and International Oil and Gas Industry,” discussing global trends in the oil and gas industry.
The report revealed that in 2024, China’s crude oil imports amounted to 553 million metric tons, a 1.9% decrease compared to the previous year, while total consumption of petroleum products stood at 390 million metric tons, down 1.7% year-on-year.
Notably, apart from the pandemic-affected year of 2022, last year’s decline in China’s crude oil imports marked nearly the first drop in over twenty years. The 2% decrease equates to a daily reduction of 240,000 barrels, totaling slightly above 11 million barrels.
The report projects that in 2025, China’s oil consumption is set to continue its downward trend, with petroleum product demand expected to reach 382 million metric tons, down by another 1.9% compared to the previous year.
The weakening of the Chinese economy is also believed to be a contributing factor to the decline in oil demand. Particularly, the persistent downturn in the real estate sector has led to a slowdown in construction activities, thereby impacting the demand for diesel fuel required for heavy machinery and petrochemical products used in paints, pipelines, and insulation materials.
According to data from the “BP Statistical Review of World Energy,” global oil demand has been increasing by an average of 1.1 million barrels per day over the past 30 years, with China representing 41% of this growth. China heavily relies on imported crude oil, with 72% of its total crude oil supply coming from abroad in 2022, as per the International Energy Agency. Consequently, a peak in China’s oil demand could have significant repercussions on the global oil market.
The International Energy Agency had previously forecast that global oil demand would peak by 2030. With the decline in China’s oil demand, the IEA’s predictions seem to be materializing earlier than expected.
Professor Sun Guoxiang from the Department of International Affairs and Business at Nanhua University in Taiwan mentioned to Epoch Times on January 24 that a peak in China’s oil demand would signify a crucial turning point in the global oil market. It is anticipated to have several impacts on a global scale:
Firstly, the growth rate of global oil demand is expected to slow down significantly if China’s demand for oil peaks, possibly leading to a trend of declining demand.
Secondly, fluctuations in international oil prices are likely to occur. A reduction in China’s demand could disrupt the supply-demand balance, leading to an oversupply in the global oil market and exerting downward pressure on oil prices. Oil-producing countries may need to reduce production to stabilize prices, and organizations like OPEC may need to coordinate further production cuts.
Thirdly, economic and policy adjustments are to be expected in oil-producing countries. Being one of the largest oil-importing countries globally, a decrease in China’s oil demand could jeopardize export revenues for major oil-exporting nations such as Saudi Arabia, Russia, and Iran. Countries heavily reliant on oil exports may face fiscal pressures and economic growth slowdowns as a result.
Fourthly, a shift in investment patterns within the oil industry is likely. A decrease in Chinese demand would reduce the need for additional oil production capacity in the market, prompting oil companies to scale back investments in upstream development. High-cost oil fields may encounter challenges in extraction, particularly in a low oil price environment.
Additionally, adjustments in shipping and trade dynamics could take place. The decline in China’s oil imports is poised to affect global crude oil trade flows, notably impacting the demand for Very Large Crude Carriers (VLCCs). Some oil tanker routes, such as those from the Middle East to China, may witness reduced transport demand, prompting shipping companies to revise their business models.
Sun Guoxiang also mentioned that the decreased oil demand in China is likely to drive global energy transition and reductions in carbon emissions.
On Friday, January 24, the price of Brent crude oil stood at $76.28 per barrel, showing a decrease of $2.85 (3.6%) compared to the same period last year.
Furthermore, on his first day as President of the United States, Donald Trump signed a series of energy-related executive orders. He declared a “state of energy emergency” in the U.S. to expedite the development of fossil fuel infrastructure, retracted the U.S. from the Paris Climate Agreement once again, lifted international restrictions on the American energy industry, signed an executive order titled “Unlocking Alaska’s Extraordinary Resource Potential” to unleash the state’s oil, natural gas, and other natural resources, and put an end to the Biden administration’s “green new deal,” among other actions.
It is certain that these measures by Trump will increase oil supply and consequently lead to a decrease in oil prices.
During the World Economic Forum in Davos on January 23, Trump also delivered a message via video calling for OPEC to lower global oil prices.