China’s Oil Demand Is Far Ahead Of Last Year’s Pace

According to the latest OPEC report, China’s oil demand is growing more than twice as fast as it did a year ago.

OPEC recently released its Monthly Oil Market Report which covers the global oil supply and demand picture through July.

OPEC crude oil production decreased by 79,000 BPD in August to average 32.8 million BPD. This marks the first OPEC production decline since April and was primarily driven by sizable outages in Libya.

The cartel revised global oil demand growth for 2017 upward by 50,000 barrels per day (BPD) to 1.42 million BPD. The group reports strong growth from the OECD Americas, Europe, and China. Global oil demand for 2018 is expected to grow by 1.35 million BPD, an upward revision of 70,000 BPD from the previous report. Growth next year is expected to be driven by OECD Europe and China.

China’s oil demand rose by 690,000 BPD in July, marking a 6% year-over-year (YOY) increase. China’s total oil demand reached 11.67 million BPD in July. Year-to-date data indicates an average growth of 550,000 BPD, more than double the 210,000 BPD growth recorded during the same period in 2016.

China’s gasoline demand was higher by around 0.10 million BPD YOY, driven by robust sports utility vehicle (SUV) sales, which were around 17% higher than one year ago. China’s overall vehicle sales in July rose by 4% YOY, with total sales reaching 1.7 million units.

The numbers from China are interesting given the constant refrain of weakening Chinese demand. This seems to be wishful thinking based on China’s investments in clean technology.

China is the world’s top market for electric vehicles, and they recently announced that they have started “relevant research” and are working on a timetable for implementation of a ban on vehicles powered by fossil fuels.

That news followed previous announcements by France and the U.K. that they would ban the sale of vehicles powered by fossil fuels by 2040. These countries are making bets that electric vehicles (EVs) will be ready for near universal adoption when these bans go into effect. By making these bets, they are trying to create a self-fulfilling prophecy.

China may indeed join the ranks of countries banning fossil fuel vehicles. This news helps drive the narrative that the age of oil is nearing its end, but China is a long way from reining in its oil consumption growth.

EVs may lag lofty expectations, in which case governments may have to revisit or delay these announced bans. And even if bans and mandates end up having the desired effect, it’s going to take time.

That’s certainly not a knock on EVs. This is not a zero-sum game because the number of drivers is growing. It is possible — and I would argue that it is highly likely — that we will see both explosive growth in EVs for the next decade, and growing oil demand.

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3 thoughts on “China’s Oil Demand Is Far Ahead Of Last Year’s Pace”

  1. Ah, but the market has calculated the growth and demand of oil. Meaning the investor would need some unexpected event or change to beat what is already calculated. Maybe a change in expected growth. Not that supply or demand will increase, but at a different than expected rate.

    This is the deal nowadays. Consumers have more choice for their transportation dollars. Choices that don’t always include 100% crude oil products. These alternatives are increasing in supply, with lower costs, and with better environmental benefit. The new fuels or battery power appear to improve the driver experience as well. So, consumers find the better acceleration attractive. Cars that are quieter and less prone to break down or requiring expensive maintenance. Also, fuel will continue the trend to mix higher percentages of bio with fossil per the need for better fuels with lower carbon footprint. Fuels that offer attractive combustion components for improving engine efficiencies. Biofuel makes it possible for all countries to actually produce their own domestic fuel. Same for battery power. They lose some of their reliance on foreign resources and international corporations. Consumers do like the local production and consumption of a neighborhood employers product. Especially if the product is environmentally better, less costly, and a improvement in quality.

    We may be at a stage that oil supply is held hostage from these trends. If oil loses its’ price advantage or suffers from regaining the history of throwing supply constraints to the wind of eventually hiccups that will act to hammer fuel costs, the consumer will never forgive or forget. They will gladly vote and pay for the stable alternative. I think the stage is set for rapid accommodation of consumers demands if oil ever attempts their historical ability to control transportation fuel costs. Picking up the political tab will not help at this stage.

      1. Not much choice at the pump in the old days. Now, I can choose E85 and save $.60/gallon. If I pump blend to approximately E30-E50 I get very little MPG loss. This is a better deal than Costco gas or Shell with five cent/gallon discount card. Their is no subsidy for ethanol. That ended years ago. Their is fed law called RFS that issues credits of compliance to oil companies as they are required to distribute minimum volumes of ethanol. This was required as the oil companies control the fuel market. These credits do have some market value and can be sold. Some have been caught scamming the system. Some oil companies refuse to distribute a competitors product so pay a higher price for the credits. Marketing tests from independent station owners suggest a huge market for higher ethanol blends. Also, these blends have been proven and tested to achieve a substantial improvement in air quality. This zone of regulation is littered with politics, cronyism, and some close to illegal activity. Some health groups and consumers groups have to go to court to get info as most of the opposition is made up or or just lies. The justification lies buried in red tape and government control bureaucracy.

        As to the battery car, well, that is a totally new source or choice the consumer has nowadays. That choice leaves petrol completely out of the picture. Really, it’s hard to figure out why oil fights these biofuel choices so much given that they improve the attractiveness of their base stock.

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