The prolonged reliance of oil markets on China may be approaching its conclusion.
- Category: News
The reason is that China’s demand for oil could reach its zenith by the close of this decade. This raises the question of whether global oil markets can sustain their dependency on China, given the uncertainty surrounding its economic recovery.
Fereidun Fesharaki, Chairman of Facts Global Energy, remarked at a recent energy conference, “For 20 years, the oil market is dependent on China, China, China, supporting the markets. The story is coming to an end.” Fesharaki foresees China’s oil demand hitting its peak within the next three to five years.
Wood Mackenzie shares a similar perspective, predicting that China’s oil demand will peak by 2027, after which a protracted decline in crude demand will ensue. According to Shiqing Xia, an oil and chemicals consultant at Wood Mackenzie, this shift is attributed to China’s active pursuit of energy transition and a gradual slowdown in long-term economic growth.
In 2020, China set ambitious goals to achieve carbon neutrality by 2060 and to strive for peak carbon emissions by 2030. Like Fesharaki, Xia anticipates that India will fill the void left by China’s declining demand for crude. India is poised to become the primary growth center for oil demand, surpassing China by the end of this decade.
Xia explained, “Outside of China, overall oil demand in India and other emerging economies in Southeast Asia will continue to grow through the early 2040s. For the next two decades, Asia’s growth engine will be India and Southeast Asia.”
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India’s economy demonstrated robust growth of 7.8% in the quarter ending June, marking its swiftest pace of expansion in a year. Additionally, the country is widely projected to become the world’s third-largest economy by 2030.
However, it is worth noting that not everyone agrees that China’s oil demand will peak in the immediate future. Some analysts contend that the timeline for such a shift could extend beyond a few years, possibly spanning decades. Yaw Yan Chong, Director of LSEG Oil Research in Asia, believes that China’s net-zero carbon emission goal by 2060 will gradually lead to a reduction in its crude demand as it approaches that deadline.
