SINGAPORE China's economy is recovering from a trough in the second quarter, with oil demand expected to rebound next year as Beijing eases COVID 19 restrictions, senior Chinese refining executives said on Wednesday.
China's zero-COVID policy ravaged its economy and restricted movements, and the recovery will come on the back of an expected contraction in oil demand in the world's biggest energy consumer in 2022, the first in two decades.
The decline of imports of crude oil this year has been seen in China for the first time in many years, said Chen Hongbing, deputy general manager at Rongsheng Petrochemicals, at the 38th Annual Asia Pacific Petroleum Conference APPEC We have seen output of gasoline and jet fuel down this year, but demand for diesel is still healthy, he said, adding that China's diesel inventories are currently low.
Beijing is expected to take more measures to boost its economy, with a focus on reviving consumption and boosting investment, while easing strict measures to contain the spread of COVID 19 infections.
We look at high frequency data like airlines bookings, road congestion and consumption, and we see a little better activity in China, according to Wu Qiunan, chief economist at PetroChina International, pointing out better demand growth in the fourth quarter compared to the third.
He said that mobility restrictions could lift gasoline consumption next year, although strong electric vehicle EV sales, which hit 6 million units in the first eight months this year, will affect growth in the motor fuel.
He said this may lower gasoline demand growth even as consumption is expected to recover when China eases COVID 19 restrictions.
Both executives expect jet fuel to recover with demand for aviation fuel.
Rongsheng's Chen said that the recovery in aviation fuel demand may take longer than other fuels because of difficulties in international travel.
Export economics will determine the volume of oil products Chinese refiners ship abroad, according to the executives.
Even if the government wants refiners to have the quota to export, they will wait and see when to export, when is the right time, said Wu, a government spokeswoman for PetroChina.
Chinese refiners are expecting to release up to 15 million barrels of oil product export quotas for the rest of the year to support sagging exports in the world's second-largest economy.
Sun Xin, director of China's privately-owned Shenghong Petrochemical, said that China's production of petrochemicals has become more competitive than Europe due to lower feedstock and energy costs.
He said that China's production costs for ethylene, a basic building block for plastics, are lower than Europe's $1,200 --300 per tonne.