Something strange is happening to China: The country drastically reduces imports oil.
Although China imports 70% of its oil, imports of crude fell in May to just 6.7 million barrels a day—the lowest level in a decade—and far from the 10.4 million barrels a day introduced by China in 2015, according to Bloomberg.
«Despite the greatest shock at the energy supply that the world has ever seen, due to the closure of the Strait of Hormuz- China is Iran's main oil customer in 80% – the oil situation in China therefore seems to be good», report market factors.
Oil demand in China has declined vertically by 9% compared to levels prior to the Gulf War, according to JP Morgan.
The reduction is, of course, explained by a combination of lower domestic demand, cuts in the production of refineries and high stocks accumulated in recent months.
China was also able to protect itself from oil shortages, mainly thanks to the colossal reserves of crude that it had accumulated, long before the Gulf war broke out.
Change in consumer behaviour
The most important interference in reducing fuel demand, changing Chinese consumers' behaviour.
Most Chinese have replaced their cars that consume gasoline with electric vehicles and using public transport.
During the holidays, charging electric vehicles to Chinese highways has increased by 55% compared to last year, according to the Ministry of Transport.
These changes have already led to a restriction on oil demand, even before the Strait of Hormuz was reopened.
Counsel Kpler even estimates that this trend to reduce imports of oil from China could continue throughout the summer, as Chinese refineries continue to use stored oil instead of increasing markets.
China stabilises global oil market
«Surprisingly, China's weakness contributes to stabilising the global oil market amid the ongoing war with Iran and the partial closure of the Straits of Hormuz», reports Bloomberg. The US agency even estimates that the decrease in Chinese oil imports has become one of the key factors preventing an even more serious global energy crisis.
Warren Patterson, head of a freight strategy at ING, argues that «reducing imports of crude from China has played a crucial role in rebalancing the world market and limiting oil prices».
History teaches
«History shows that previous oil crises often led to a constant fall in petrol demand and today what is happening in China may well not be different reaction», says Natasha Caneva, head of the Strategic Merchants at JP Morgan.
For example, after the 1973 oil crisis, the next decade was marked by the greatest decline in demand for fossil fuels in U.S. history.
«It was a kind of collective shock to the American system, which prompted policy makers to look for ways to get away from oil», recalls Jason Borov, founding director of the Center for Global Energy Policy at Columbia University.
Similarly, after Russia invaded Ukraine in 2022, the European Union adopted regulations that drastically reduced its dependence on natural gas in favour of renewable energy sources.
Reduction of global demand
Already, the Gulf war has significantly reduced global oil demand: in March, demand fell by 2.8 million barrels a day. In April, the corresponding percentage was 4.3 million barrels a day and in May, 5.6 million.
«We have not yet reached the drop in demand by 10 million barrels the day it was recorded during the pandemic. But we're getting closer.»Professor Borov says.
«It is not clear when the Strait of Hormuz will be reopened. The longer the closure lasts, the more permanent many changes will be made in consumer behaviour», says Joe Brusellas, head economist of RSM US. «Previous crises and wars in the supply chain, he says, have given households and businesses lessons they will not forget soon».
preferred source on Google
To show more articles by Maritime in your searches easily and quickly, you must add the site to your preferred sources. You can do it by going Here..
