Singapore/Beijing — China’s fuel demand is on track to hit record highs this year on a rebound in car sales and booming domestic air travel, even as a resurgence of COVID cases slows movement in some cities in the near term, analysts say.
Despite slowing growth for diesel, the main industrial fuel, overall consumption of gasoline, diesel and aviation fuel in the world’s top crude oil importer is expected to grow by 7% to 11% in 2021 to a record between 8.4 million and 8.9 million barrels per day, analysts at consultancy SIA Energy, IHS Markit and Energy Aspects estimated.
By comparison, the International Energy Agency (IEA) in March forecast China’s demand for gasoline, jet fuel and diesel would rise by 6.5% to 8.2 million bpd in 2021.
China’s strong growth in fuel use has helped stoke a 50% jump in global crude oil prices from 2020.
The latest outbreaks of the COVID-19 Delta variant across 17 provinces are expected to constrain travel in the near term, but analysts say the overall growth trend remains intact.
“If fast containment can be achieved by mass testing, and future large-scale outbreaks can be avoided with the vaccination rollout, gasoline and jet will be still on track to hit a record,” ISH Markit analyst Shi Fenglei said.
Gasoline demand, which accounts for a quarter of China’s refined fuel use, is forecast to rise by 11% to 13% this year to a record 3.8 million to 4.1 million barrels per day, well above the IEA’s March forecast of 3.5 million bpd.
Gasoline-guzzling sport utility vehicles continue to dominate new sales, making up nearly half the first half 2021 total, steady from last year, IHS data showed.
People are spending more on cars while cutting overseas travel as China’s borders remain largely sealed to contain the coronavirus.
“Our car models are not the most trendy, but we’re predicting annual sales to be a quarter above last year, as customers appear to have more to spend, now that they’re unable to travel abroad,” said an east China-based car dealer of General Motors Co’s Cadillacs.
Flight cancellations due to the latest COVID outbreaks will cut jet fuel demand for the next two weeks, but full-year aviation fuel demand is seen nearing or topping 2019 levels, at between 880,000 and 947,000 bpd in 2021, Energy Aspect’s Liu Yuntao and FGE’s Mia Geng estimated.
According to aviation data firm OAG, passenger seat capacity in China from February through July was 413 million, up 52% from the same period in 2020 and about 1 million more than in the same period in 2019.
Demand for diesel, which powers heavy machinery like excavators and trucks, is expected to rise just 1.7% from 2020 to 3.88 million bpd, FGE’s Geng estimated.
Sales of excavators, a gauge for the mining and construction sectors, began to tumble in April and fell through June versus a year ago, while utilization also dropped, according to Chinese financial data group Wind.
Even record first-half heavy-duty truck sales, another proxy for diesel use, did not boost fuel demand, said Cassie Liu of IHS Markit. Sales were driven more by aggressive marketing by vehicle dealers than trucking activity.