Explainer-China's oil imports have plunged during the Iran war. How much will they recover?
Explainer-China's oil imports have plunged during the Iran war. How much will they recover?.
BEIJING, July 17 (Reuters) - For five years, China imported an average of 11.5 million barrels of oil per day. Since April, it has averaged just 8 million bpd.
The speed at which China has slashed imports — shipments fell to 40% of pre-Iran war levels in June — has kept a lid on global prices and freed up cargoes for other countries.
Why has China's oil imports dropped so dramatically recently?
How might fuel export restrictions impact China's oil needs?
What role does strategic stockpiling play in Chinese imports?
How is electric vehicle adoption affecting China's oil demand?
Market observers are puzzled over how the world's biggest oil importer achieved that reduction and want to know how permanent the drop in demand is.
"It's the million-dollar question," said Michal Meidan, head of China Energy Research at the Oxford Institute for Energy Studies. "There's a massive level of uncertainty because we don't fully understand what has happened."
The uncertainty reflects the lack of visibility into China: the size of its stockpile is a state secret, its oil companies are opaque and its data is patchy.
Some analysts predict China's oil imports could ultimately decline by 1 million to 2 million bpd after the war from pre-conflict levels, a sharp drop in demand for a country that for decades drove growth in global oil consumption.
The war has revealed a Chinese transport system able to run on less fuel than thought possible, which has significant implications for crude imports given roughly half are refined into transport fuels.
What's less clear is whether the war will greatly accelerate electric car sales, especially as petrol prices have fallen back to pre-war levels after surging by more than a quarter.
Electric and hybrid cars rose to a record 62% of new car sales in June. However, hundreds of thousands fewer cars have been sold this year due to a weak Chinese economy and slowing electrification of a fleet that is still 87% petrol-powered.
It does, however, look like the war will accelerate the destruction of diesel demand after the government launched a plan in June to electrify trucking, aiming to have some busy short-haul routes 80% electrified by 2030.
Consultancy Rystad expects Chinese gasoline and diesel use to drop 6.6% and 6.9%, respectively, versus their forecasts of 3.5% and 3% before the war.
"The crisis has acted as a trigger," says Ye Lin, an analyst at Rystad. "It helped consumers build more confidence in electric cars and trucks."
If the Iran war further slows China's domestic growth or its export markets, it poses further risk for the country's oil demand, says Meidan from the Oxford Institute for Energy Studies.
China's property crisis has battered the construction industry, which has dented diesel demand for several years, and property prices are still falling.
