China oil demand may shrink first time since 2002 as Covid curbs bite

Oil demand in China could contract for the first time in two decades this year as Beijing’s zero-Covid policy keeps people at home during upcoming holidays and reduces fuel consumption.
 

Lockdowns in key cities such as financial hub Shanghai already hurt China’s oil demand in the second quarter while recovery for the rest of the year is expected to be slow as China sticks to its zero-Covid policy. This could cap intake of the world’s top crude oil importer and dent global oil prices.
 

China’s demand for gasoline, diesel and jet fuel could fall by 380,000 barrels per day (bpd) to 8.09 million bpd in 2022, which would be the first contraction since 2002, said Sun Jianan, an analyst from Energy Aspects. 
 

In comparison, demand rose 450,000 bpd, or 5.6 per cent, in 2021. So far this year, China has seen its January-August crude oil imports decline by 4.7 per cent, the first contraction for the eight-month period since at least 2004.
 

“We believe imports will only rise substantially in early Q1 23 when China begins to source crude for the Lunar New Year, rather than our previous expectation of Q4 22,” Sun said. While state refiners are ramping up output, independent refiners — which account for a fifth of China's crude imports — are keeping operations down amid a tax probe, he said.