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As COVID cuts take effect, China's oil demand may fall for the first time since 2002

Image: Reuters Berita 24 English - China is the world's biggest energy consumer, but this year could be the first time in 20 years that ...

Image: Reuters

Berita 24 English - China is the world's biggest energy consumer, but this year could be the first time in 20 years that its oil demand goes down. This is because Beijing's zero-COVID policy keeps people at home during the holidays, which cuts fuel use.

Hundreds of millions of Chinese people who usually travel during the Mid-Autumn Festival, which is on September 10 this year, and the Golden Week holidays in early October are expected to stay home to avoid being caught in sudden lockdowns meant to stop the spread of COVID-19.

The number of new COVID-19 cases in mainland China.

Lockdowns in key cities like Shanghai, which is a financial hub, have already hurt China's oil demand in the second quarter, and the country is expected to have a slow recovery for the rest of the year as long as it sticks to its zero-COVID policy. This could limit how much crude oil the biggest oil importer in the world can get and hurt oil prices everywhere.

China's demand for gasoline, diesel, and jet fuel could drop by 380,000 barrels per day (bpd) to 8.09 million bpd in 2022. This would be the first drop since 2002 and a "watershed moment," said Sun Jianan, an analyst from Energy Aspects.

In 2021, on the other hand, demand rose by 450,000 bpd, or 5.6%.

So far this year, China's crude oil imports have dropped by 4.7% from January to August. This is the first drop for the first eight months of the year since at least 2004.

"We think imports won't go up a lot until early Q1 23, when China starts buying crude for the Lunar New Year. This is later than we thought they would go up in Q4 22," Sun said.

He said that while state refiners are increasing output, independent refiners, which import a fifth of China's crude oil, are slowing down operations because of a tax investigation.


When hundreds of COVID cases were found in Sanya, a major tourist hub on the tropical southern island of Hainan, in early August, about 80,000 tourists were stuck there. This was not good for holiday travel.

Local officials in populated provinces like Hebei, Jiangxi, and Henan think that road traffic will drop by up to 20% compared to last year during the Mid-Autumn Festival.

As of August 31, data from ForwardKeys showed that bookings for domestic flights during the holiday are 38.5% lower than in 2021, and bookings for Golden Week flights are expected to drop by 23.8% from last year.

Baidu data shows that road traffic in the southwestern city of Chengdu is 50% lower this week than it was a year ago. This is because the COVID lockdown has been extended.

Sun of Energy Aspect said that demand for gasoline, diesel, and jet fuel is expected to rise by about 530,000 bpd from the third quarter to the fourth quarter, when it will reach 8.55 million bpd. However, demand could drop even more if COVID cases rise.

Mukesh Sadhav, head of downstream and oil trading at Rystad Energy, said that the demand for aviation fuel, at about 500,000 bpd, is less than half of what it was before the pandemic, when it was between 1.1 million and 1.2 million bpd.

He said, "The return of road traffic and diesel will depend more on the growth of the macroeconomy."

Still, Sadhav said that China's fuel use could go up by 100,000 bpd this year, to 8.2 million bpd, because demand is expected to rise again after the Communist Party Congress in mid-October.

"Overall oil demand is expected to rise by 500,000 bpd in November compared to the same month last year and by 1 million bpd in the period from December to February," he said.

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