China’s oil imports have plunged during the Iran war, with shipments falling to 40% of pre-war levels in June. The speed at which China has slashed imports has kept a lid on global prices and freed up cargoes for other countries.

Factors Affecting Demand

Market observers are puzzled over how the world’s biggest oil importer achieved that reduction and want to know how permanent the drop in demand is. The uncertainty reflects the lack of visibility into China, including the size of its stockpile, which is a state secret.

Some analysts predict China’s oil imports could ultimately decline by 1 million to 2 million barrels per day after the war from pre-conflict levels, a sharp drop in demand for a country that for decades drove growth in global oil consumption.

Transportation and Industrial Demand

The war has revealed a Chinese transport system able to run on less fuel than thought possible, which has significant implications for crude imports given roughly half are refined into transport fuels. Additionally, the war may accelerate the destruction of diesel demand after the government launched a plan to electrify trucking.

China’s property crisis has battered the construction industry, which has dented diesel demand for several years, and property prices are still falling. A structurally weaker economy could also hit demand for plastics and other petrochemicals, hurting refiners and reducing oil use as the sector faces competition from coal-based alternatives.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.