According to the latest analysis by Wood Mackenzie, China’s oil demand will recover to 13 million barrels per day (bpd) in Q2 2020, a 16.3 per cent jump compared to Q1 this year.
However, comparing year-on-year (YoY), Q2 2020 demand is about 2.5 per cent below Q2 2019. The pace of recovery differs among oil products. China’s demand for gasoline and diesel are expected to increase YoY from Q3 2020 onwards.
Wood Mackenzie research associate Yuwei Pei said: “Since April, the Chinese government has gradually lifted the coronavirus containment measures. Specifically, China is now easing restrictions on social, commercial and travel activities.
“More people are returning to the office after a period of telecommuting. In addition, private car use is now seen as the safest mode of mobility, shifting passengers from public transport to private cars.”
As a result, gasoline demand is recovering quickly and is likely to return to last year’s levels by June 2020. Wood Mackenzie estimates gasoline demand to reach 3.4 million bpd in Q2, just a 0.8 per cent decline YoY. By third quarter this year, China’s gasoline demand would have surpassed the same period last year by 3 per cent to 3.5 million bpd.
Diesel or gasoil demand is recovering this quarter as well, supported by industrial and road freight activities. China’s demand is expected to reach 3.4 million bpd in Q2 2020, a 3 per cent decline YoY. Courier delivery services are emerging as a major growth driver of road freight, reflecting a surge in e-commerce. This is reflected in demand turning green by 1.2 per cent to 3.4 million bpd in Q3 2020 compared to the same period last year.
On the other hand, China’s jet fuel demand will continue to fall for the rest of the year. Wood Mackenzie expects an even larger YoY decline of 51 per cent to 0.4 million bpd for demand in Q2 to compared to Q1 this year. Air traffic remains weak due to restrictions on international flights and precautions taken by passengers to avoid crowded places. China’s aviation industry is also struggling financially due to the coronavirus pandemic.
Overall, China’s oil demand is expected to rise a modest 2.3 per cent to 13.6 million bpd for H2 2020, compared to H2 2019.
Despite some pockets of recovery in China’s oil demand for the rest of the year, Wood Mackenzie consultant Yujiao Lei warns of external risks that could set the country back.
She said: “China’s oil demand recovery trajectory will depend on how the pandemic pans out globally. Even if China avoids a second wave of infections, as long as the pandemic remains globally, the country will maintain strict border controls, thus restraining aviation. Besides, the ongoing global economic downturn will likely have an adverse impact on China’s exports and investments, putting downward pressure on industrial and commercial transport activity.”