SINGAPORE, Sept 28 (Reuters) - China's economy is
recovering from a trough hit in the second quarter, with oil
demand expected to rebound next year as Beijing eases COVID-19
restrictions, senior Chinese refining executives said on
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, as China's zero-COVID policy
ravaged its economy and restricted movements.
"This year we have seen the decline of imports of crude oil,
first time in many, many years in China," Chen Hongbing, deputy
general manager at Rongsheng Petrochemical, told a forum at the
38th Annual Asia Pacific Petroleum Conference (APPEC).
"We have seen output of gasoline and jet fuel is down but
the output for diesel is actually up and demand is still
healthy," he said, adding that China's diesel inventories are
Beijing is expected roll out more measures to shore up 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, consumption, and we see a little better activity in
China," Wu Qiunan, chief economist at PetroChina International
said, pointing to better demand growth in the fourth quarter
versus the third.
Easing 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 added.
"That's a big replacement of gasoline consumption," he
said, adding this may lower gasoline demand growth even as
consumption is expected to recover when China eases COVID-19
Both executives also expect jet fuel to recover with
However, the recovery in aviation fuel demand may take
longer than other fuels because of difficulties in international
travel, Rongsheng's Chen said.
As for fuel exports, the executives said export economics
will determine the volume of oil products Chinese refiners ship
"Even if the government says (refiners) can have the quota
to export, they will wait and see when to export, when is the
right time," PetroChina's Wu said.
Chinese refiners are expecting Beijing to release up to 15
million tonnes worth of oil product export quotas for the rest
of the year to support sagging exports in the world's
For petrochemical production, China has also become more
cost competitive than Europe where electricity prices have
surged following a disruption in natural gas supplies from
Russia in the wake of the Ukraine war, Sun Xin, director of
China's privately-owned Shenghong Petrochemical said.
"Because of the Ukraine war, the industrial power
consumption cost between China and Europe has widened and the
gap has been as large as half a dollar per kilowatt hour at one
point," Sun said.
"The basic production cost for raw materials such as
ethylene is way below that of Europe's and I believe this could
be in the range of $1,200-$1,300 per tonne."
(Additional reporting by Chen Aizhu and Muyu Xu; Editing by