China’s oil consumption plunges as power demand soars

Slower consumption in China led OPEC to lower global oil demand growth estimates this week, underscoring the significant impact of the world’s second-largest economy on energy markets.

Despite this, electricity generation in China reached record levels in the first half of 2024, showing strong usage by households and factories. Additionally, LNG imports increased by 10 per cent, reaching a three-year high.

The country is working to shift energy systems from polluting fuels to cleaner sources, which can help address conflicting signals and reduce refined fuel use while meeting increasing electricity demand.

However, China’s power suppliers still face a significant challenge as they continue to rely heavily on fossil fuels, as evidenced by record thermal coal imports in the first half of 2024.

Key data points in the energy and power sector provide insights into China’s demand for fossil fuels and its impact on global markets. China, the world’s largest crude oil buyer, imports about 75 per cent of its oil needs.

In July, imports dropped to their lowest since September 2022, signaling reduced demand due to weak processing margins and low fuel demand. China imported 42.34 million metric tons, down 12 per cent from the previous month.

The rise of electric and clean energy vehicles in China is reducing oil and fuel demand. In July, half of all vehicles sold in China were electric or hybrid, a significant milestone in transitioning away from petroleum products.

This shift has led to a 32 per cent increase in China’s electricity demand from 2018 to 2023, reaching 9,442 terawatt hours, the highest globally.

Despite the growth in clean energy, coal remains the dominant source of electricity generation in China, accounting for around 60 per cent of the total.

However, its share in the generation mix has been steadily declining, while the share of clean energy sources has risen from 22 per cent in 2013 to over 35 per cent in 2023.

China’s growing appetite for natural gas is another factor influencing its energy mix. LNG imports surged 10 per cent in the first half of 2024 compared to the previous year, reaching a three-year high.

Attribution: Reuters

Subediting: Y.Yasser