DJE Forum: China’s Oil Products Demand Could Shrink by 600,000 b/d on Year

China’s demand for refined oil products is expected to shrink this year by around 600,000 b/d or 8.9% from 2025, amid high oil prices and electric vehicle growth, according to Sinopec Economics and Development Research Institute in a presentation at Dow Jones Energy Forum in Singapore on Wednesday.

The decline will be third consecutive year of negative growth for oil, with Sinopec’s research arm expecting gasoline and diesel to lead the declines this year. Consumption growth for gasoline is expected to slip 8.7% to 149 million metric tons and diesel is estimated to slip 11.4% year on year to 164 million mt. Jet fuel consumption, on the other hand, is expected to grow at a modest rate of 1.3% annual in 2026, compared to an earlier forecast of 3%-4%.

“We (were) getting used to a robust demand growth; in the past 20 years China was contributing 50% to 70% (in oil demand) of the world’s incremental growth. But currently we need to accept a better economy with no growth,” said Fairy Wang, vice president with Sinopec EDRI.

In July, the penetration of EVs in the passenger car market was 65%, compared to less than 40% in January; this means EVs are replacing fossil-fuel cars as the cost of charging is cheaper than fuel. Currently, EVs account for around 15% of China’s total vehicle fleet, with sales expected to accelerate to 21.7 million units or over 60% penetration before tax exemption expires at the end of 2027.

Diesel demand in China is also likely to be affected by electrification of trucks due to improvements in battery technology, which can support 300-500 kilometers per charge from 100-200 kilometers per charge previously, which will slow down diesel demand, said Sinopec EDRI.

Electrification and an increasing reliance on renewables require increased storage capacity for electricity, said Steve Lewandowski, Vice President & Head of Base Chemicals, Chemical Market Analytics by OPIS. However, “if one country can make this happen with central control, it is China,” he added.

China’s total refinery runs fell 5.4% to 700 million mt in the second and third quarters, with May and June crude oil imports decreasing to around 7 million b/d, added Sinopec EDRI. Crude imports declined by 13.2% year on year to around 8.5 million b/d in January-July 2026.

China issued a total of 37 million mt export quotas for clean petroleum products in January and June, but temporary controls held January-July exports at 14.36 million mt, Sinopec EDRI said.

With the conflict in the Middle East Gulf, China has already diversified their crude purchases from Latin American countries to meet domestic refineries’ demand, Wang added.

In the long run, China’s small-to-medium refineries with simple product slates will exit, removing 80-100 million mt per annum and domestic refining capacity will hit 900-910 mmpa by end-2030 from 952 mmpa in 2026, according to Sinopec EDRI.

This will come amid a long-term oil-to-chemical transition, with the country increasingly shifting away from refining and towards petrochemical production. The move will require adding process units to shift yields from gasoline and diesel to existing technology, said Lewandowski.

—Reporting by Thomas Cho, thomas.cho@dowjones.com; Edited by Mei-Hwen Wong, mei-hwen.wong@dowjones.com