The cumulative growth of demand for oil in the PRC in 2024 and 2025 will make 550 thou bbl per day – almost half as high as in 2023 (1.04 mln bbl per day). It is underpinned by the exhausting economic recovery after the COVID-19 pandemic. In January 2023, China cancelled the mandatory quarantine for tourists arriving to the country, and in August – the mandatory PCR testing. This entailed the explosive growth in air transportation: in 2022, the passenger turnover of the civilian air flight in China was below the pre-pandemic level by 54.4%, but in 2023 it exceeded this level by 7.1% (as per International Air Transport Association, IATA). However, this year the air transportation market has slowed down significantly: in 2023, the annual passenger turnover grew by 138.8%, and during the first 9 months of 2024 – only by 13.2%.
The exhaust of the economic recovery is quite noticeable for the economy in general. In 2023, China demonstrated the GDP growth of 5.2%, and as of the end of 2024 it will make 4.8%, in 2025 – only 4.5%, according to the October forecast of the International Monetary Fund (IMF).
However, electrification of cars and gasification of trucks also play a significant role. The share of e-vehicles and hybrids in the new cars sales in China exceeded 50% during the recent several months, while as in the beginning of the COVID-19 pandemic it was below 5%. Hence, according to the EIA estimates, the demand for automotive gasoline in the PRC decreased by 14% in August 2024 (YoY, down to 3.2 mln bbl per day). On the other hand, sales of trucks fueled by liquified natural gas (LNG) in China more than doubled during the first half of 2024 (up to 109 thou vehicles), thus depressing the demand for diesel fuel.
Higher economic growth rates in India are combined with relatively low electrification of the transportation sector. According to the IMF forecast, in 2024 India’s GDP will grow by 7%, and in 2025 – by 6.5%. The share of e-vehicles and hybrids in the new cars sales in the country was only 25 in 2023 (vs 38% in China), and they constitute 0.3% of the total cars fleet (vs 7.6% in China). The growing demographic metrics in India remain one of the demand drivers: in China the total population in 2023 stayed at the level of 2020 (1,411 mln people), but in India during this period it grew by 2.4% (up to 1,429 mln).
On top of that, the urbanization capacity is still far from being exhausted in India. In China cities accounted for 65% of population in 2023, and in India – only for 36%. Bridging this gap will contribute to the growth of demand for petroleum products in petrochemical industry, construction and transportation sectors. That is why India will remain the engine in of the oil market in the second half of the decade.
