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Chinese Oil Demand In 2023 May Have Already Peaked

Chinese oil demand for this year may have already peaked and could ease this quarter amid China’s continued struggles to significantly boost its economy after ending the Covid restrictions, analysts have told Bloomberg.

The prospect of weaker oil demand growth in the world’s largest crude importer is bad news for oil market bulls.  

Chinese oil demand for 2023 likely peaked at 16.4 million barrels per day (bpd) in the second quarter, Jianan Sun, an analyst with Energy Aspects, told Bloomberg. This quarter, demand is set to decline to 15.8 million bpd, before rebounding to around 16.2 million bpd in the fourth quarter, according to Energy Aspects. 

China, however, has returned to importing near-record monthly volumes of crude as it has accelerated stockpiling. The country is estimated to have made in June the largest monthly additions to inventories in three years. Cheap Russian crude played a large part in the high level of stockpiling last month, as China accelerated buying of Russian cargoes to benefit from the discounts at which Russian grades are being offered on the market relative to the crude from other sources, including from the Middle East.

While cutting its global demand growth estimate for 2023 for the first time this year, the International Energy Agency (IEA) noted last month that Chinese demand growth continued to surprise to the upside. China is expected to account for 70% of the global oil demand growth this year, which was expected at 2.2 million bpd in IEA’s monthly report for July, down from 2.4 million bpd expected in the June report.

A 3-million-bpd global demand surge in May compared to April was largely driven by soaring demand in China, India, Saudi Arabia, and the United States, the latest data by the Joint Organizations Data Initiative (JODI) showed last month.

China’s total oil product demand hit 17.37 million bpd in May, the JODI data showed. This was an increase of 1.7 million bpd compared to April, and the second-highest level ever reported in JODI.

Other Chinese oil data also pointed to strong demand—crude oil imports jumped by 1.8 million bpd to 12.15 million bpd in May, while refinery intake surged by 1.81 million bpd to 16.38 million bpd.

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By Tsvetana Paraskova for Oilprice.com

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