A view shows part of the state oil firm Petroleos Mexicanos (Pemex) refinery in Salamanca. State of Guanajuato, Mexico, Monday, December 19, 2022.

Danil Shamkin | Nurphoto | Getty Images

China’s oil demand growth this year could be half of pre-Covid 2019 levels, according to Eurasia Group, as key segments of the world’s second-largest economy struggle from a slowdown.

The country is unlikely to return to its model of an oil-intensive economic growth this year, with the its construction and auto sectors — key drivers for oil demand — now looking “exhausted,” the risk consultancy said in a note.

The consultancy expects demand growth to be around 250,000 bpd to 350,000 bpd, less than half of what it was in 2019 — demand growth will not return to the million barrels per day seen between 2015 and 2020.

The incremental fuel demand growth in China that the oil industry has come to literally bank on over the past two decades is no more.

Eurasia Group

Even if China’s property sector recovers, future growth on the level seen before the pandemic “is not possible” given the country’s soaring debt levels, declining demographics and reduced GDP growth expectations, according to the consultancy.

“The incremental fuel demand growth in China that the oil industry has come to literally bank on over the past two decades is no more,” Eurasia Group said.

China will lose its spot to India as the primary driver for global oil demand through 2030, the International Energy Agency said in a report.

Chinese oil consumption hit an all-time high of 16.03 million barrels per day last year — a 1.2 million barrels per day growth — as the country took advantage of plunging oil prices to import large volumes of cheap crude, analysts from JPMorgan wrote in a recent note.

The record figure was also boosted by increased domestic passenger travel levels after Covid restrictions were lifted.

However, the supporting factors that led to record demand growth last year are fading in 2024, said JPMorgan, which expects an increase of 530,000 barrels per day this year as China continues on the trajectory of a “low-quality growth.”

“The country’s economic slowdown is weighing on growth in gasoline and especially diesel demand,” Rapidan Energy’s Director of Refined Products Linda Giesecke told CNBC, adding that an electrification of China’s auto fleet was also restricting growth in gasoline demand.