Trader and shipowner Vitol believes Chinese oil demand is changing, but product tankers will still be able to cash in.
Head of research Giovanni Serio said that growth will switch from transport fuels to refined products used as petrochemical feedstocks in plastics manufacturing.
“It is likely that petchem feedstocks will be the driving force of oil demand in China and globally,” he explained.
Serio said China is set to play a significant role with capacity increases in the next few years.
“The growth next year is entirely capable of satisfying the global plastic demand growth. And subsequent years will follow the same trajectory,” he added.
In the last 20 years, China has been a primary driver of oil demand.
From 2004 to 2024, this nearly tripled, accounting for over half of oil demand growth globally.
Now that trend is being challenged, Serio said.
Traders are asking whether Chinese oil demand, particularly that for gasoline, has peaked, the researcher added.
He pointed to the trend of slowing the popularity of electric vehicles and lessening commitment to environmental targets leading to a longer energy transition, with global demand only peaking in the 2030s.
Gasoil versus LNG
“Future demand growth is almost entirely linked to petrochemical feedstocks — road fuels have already, or will soon, peak,” Serio added.
Asian demand is also being driven by naphtha and jet fuel, as well as LPG.
Turning to gasoil, Serio said total freight growth is closely aligned to industrial production, as well as the energy transition from road to waterway and rail.
Freight accounts for 70% of total diesel demand, he calculated.
Heavy-duty vehicle demand, which is most exposed to the switch to LNG, makes up 40%.
“LNG consumption — and therefore a reduction in gasoil demand — is entirely dependent on economics,” Serio explained.
“Where LNG costs less, LNG truck sales rise and LNG consumption increases, and the reverse when diesel is less expensive. We’re forecasting poor LNG truck economics to 2027 and then a resumption of the LNG penetration trend once the economics make sense,” he said.
