One year ago, there were high hopes that the reopening of China would act as a catalyst for the global oil markets. However, according to Citi’s commodities group, this prediction did not come to fruition. In a recent advisory, Citi cautioned its clients against expecting China to be a major driver for global energy markets in 2024.
Citi believes that while China’s economic stimulus measures will provide some support to the Chinese economy, it will only be moderate. The bank foresees a flat crude oil import scenario, with the country’s needs not significant enough to offer price support for crude. Although China capitalized on the availability of cheap oil from Russia and Iran in 2023 and engaged in strategic stockpiling, Citi predicts that the storage volumes for 2024 will not exceed 200,000 barrels per day (b/d). Coupled with an anticipated rise in domestic production by 100,000 b/d, the demand for crude is not expected to experience a strong “pull”.
Citi’s projection for oil demand growth in China stands at a mere 300,000 b/d, with emphasis placed on the petrochemical segment. This aligns with recent statements made by Sinopec, China’s largest refiner, which hinted that gasoline demand may have already peaked due to the record-breaking sales of electric vehicles (EVs).
While Citi does not anticipate significant growth in refined product exports, it notes that Chinese refineries are shifting their focus away from gasoline production towards middle distillates. This strategic shift may result in higher-than-expected distillate exports, fueled by robust cracks in the Asia Pacific region.
Looking ahead to 2024, Citi expects China’s crude oil imports to remain steady at around 11.3 million b/d, similar to the previous year’s figures. However, monthly import volumes may experience some volatility, as demonstrated by the 1.1 million b/d increase in December 2023 compared to November figures.
Reporting by Tom Kloza, Editing by Rachel Stroud-Goodrich