China’s diesel demand fell in June by the most in three years, US EIA says by Reuters

NEW YORK (Reuters) – China’s diesel demand fell 11 percent year-on-year to 3.9 million barrels per day in June, the biggest percentage drop since July 2021, the Energy Information Administration said on Thursday US.

WHY IT’S IMPORTANT

Sluggish fuel demand from China has weighed heavily on oil markets this year, troubling market participants who had bet that the world’s second-largest economy would continue to be an engine of growth.

The Organization of the Petroleum Exporting Countries cut its 2024 oil demand forecast this week, citing weaker expectations for China, the first cut since the outlook was published a year ago. The Paris-based International Energy Agency cut its forecast for 2025, also citing a weak Chinese economy.

CONTEXT

Diesel consumption hit a record high in China last year, but demand has fallen sharply since the second quarter of this year, according to the EIA.

The decline is largely due to two factors: the country’s struggling real estate sector has slowed economic growth; and liquefied petroleum gas is replacing diesel in heavy-duty trucks, the EIA said.

“In addition to lower diesel use due to slowing economic activity in the construction and real estate sectors, a small but growing portion of China’s truck fleet is using LNG instead of diesel for fuel,” the EIA said.

BY NUMBERS

Sales of LNG-powered trucks rose 307 percent to 152,000 last year, data from Chinese information provider CV World shows. Consultancy FGE estimates that LNG will replace diesel demand by 110,000 to 120,000 bpd in China this year and next.

Chinese refiners have struggled in this context. Oil refinery output fell 6.1 percent in July from a year earlier, according to official data, down for the fourth straight month.