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The property sector crisis and the rise of LNG use in trucking have weighed on China’s diesel demand this year, dampening the prospects of oil demand growth in the world’s top crude importer, which has been a key driver of global demand growth for years.
Diesel demand in China is particularly weak and analysts expect it to remain weak for the rest of the year.
With slumping diesel demand and lackluster gasoline consumption, Chinese oil demand growth is expected to be just below 3% this year compared to 2023, according to analyst estimates compiled by Reuters.
To compare, China’s annual oil demand growth averaged 4.6% in the past decade and rebounded by 11.7% last year after nearly three years of COVID-related lockdowns.
Gasoline demand may be plateauing, but diesel demand is outright falling, according to analyst projections.
China’s diesel demand in the second half of 2024 is set to decline by between 2% and 7% on an annual basis, according to four out of five analysts in a Reuters survey.
Apart from weaker-than-expected economic growth and the property crisis, Chinese diesel demand is also hit by the surge in LNG-fueled trucking, which has started to displace some diesel consumption.
“Diesel demand is the most sluggish sector within oil demand in the second half, with significant displacement … in the trucking sector,” Wood Mackenzie consultant Xia Shiqing told Reuters.
LNG-fueled heavy-duty vehicles are set to limit diesel use for transport, especially now that LNG is cheaper than diesel.
Chinese sales of LNG trucks have been booming in recent months, as global and Asian LNG prices are much lower than the record highs seen at the peak of the energy crisis in the summer of 2022.
The prospect of abundant new LNG supply coming to the market after 2026, especially from Qatar’s huge expansion projects, makes analysts optimistic about the acceleration of the Chinese LNG-fueled truck market as growing LNG supply could keep prices low enough to continue displacing diesel.
