China's Oil Demand Decline (with Yvonne Man, Avril Hong)

David Fickling argues that the mystery behind China's 4.6 million barrel per day drop in oil demand is explained by published data. Key factors include a reversal of last year's excess refining and product exports, a significant impact from electric vehicle adoption (800,000 bpd), and a sharp decline in plastics production due to high NAFTA prices (700,000 bpd). He concludes that China's oil demand has peaked and is in decline.

Yields

NDX

RUT

explicit

Metals

USD

Bloomberg Business Publications 7.0
Financial Media
David Fickling 5.5

China's Oil Demand Decline (with Yvonne Man, Avril Hong)

wti

China's oil demand... has peaked and is in decline.

Asks David Fickling to explain the mystery behind China's big plunge in oil imports.

Yvonne Man
David Fickling

The 4.6 million barrel per day drop is explained by published data. Last year, China was using 2.5 million bpd more than domestic demand due to excess refining and product exports. Reversing this explains nearly half the drop.

There are no secret inventories or chemical plants needed to explain the data.
Asks if electric cars are part of the equation for the drop in oil demand.

Avril Hong
David Fickling

Yes. With high EV penetration, people can stop filling up their plug-in hybrids. Public charging in April declined 37% month-on-month. The change in charging behavior accounts for about 800,000 barrels a day of lost demand.

Traditional economic models based on inelastic oil demand are outdated in the era of high EV penetration.
Asks if this explains everything or if there is something else missing.

Yvonne Man
David Fickling

The last factor is plastics. NAFTA prices doubled in March, causing a record drop in Chinese primary plastics resin production (700,000 bpd). Additionally, China is switching to US ethane for plastics production (300,000-400,000 bpd).

Adding these factors together explains the entire drop. China's oil demand has peaked and is in decline.

SignalTube

markets at a glance