China changes narrative on weak oil demand

China’s latest oil import data has been quite optimistic, with November imports up 5% year-on-year. Not only that, but China is building new storage capacity, so it can continue buying more crude, rather than showing that its oil demand growth is weakening, as forecasters say. China is making oil demand forecasts uncertain.

FGE NexantECA, for example, recently reported that China’s apparent demand in October had been revised downward to 14.6 million barrels of crude oil per day, or 570,000 barrels per day less than previously expected. At the same time, the forecaster, along with others, expects the world’s largest oil importer to increase its oil purchases next year, because it is apparently building up a huge crude oil reserve.

As a result, Asian oil demand, which FGE NexantECA expects to decline this year by 38,000 barrels per day, will recover next year, adding 36,000 barrels per day. This will make Asia one of two continents where forecasters predict oil demand will grow next year, while the rest of the world will see a decline.

The forecasts, however, are uncertain. Bloomberg reported this week that China’s continued oil purchases for storage were “masking” a slowdown in oil demand growth driven by the adoption of electric vehicles. However, the latest car sales figures outside of China show a 32% year-on-year drop in total car sales during the first week of December, and a 17% year-on-year drop in sales of electric vehicles specifically. This suggests that electric vehicle sales, even in China, are not on an unbroken upward curve, erasing barrel after barrel of oil demand with each passing day.

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According to Kpler data, oil stored in China currently exceeds 1.5 billion barrels. Storage capacity, according to Energy Aspects, is 2 billion barrels, and could expand by 260 million barrels in 2026, even as actual imports remain stable in 2025, the forecaster says, unless they increase.

“Actual imports could be much higher than our forecasts,” especially during the second half of the year, an Energy Aspects analyst told Bloomberg, as the firm forecast China’s oil imports next year would be 11.4 million barrels a day, or flat in 2025. And yet China’s November average was 12.38 million barrels a day as storage apparently ramped up.

China has been stockpiling crude oil at a daily rate of about 1 million barrels this year. It has also been building new storage capacity. A total of 11 new storage sites will be built across the country this year and next, with a combined capacity of about 169 million barrels. According to Citigroup, China will continue to accumulate crude at a rate of 900,000 barrels a day next year, Bloomberg reported, adding that this would mean an increase in storage rates of 800,000 bpd from March of this year. When January and February are added, the storage rate increases to 990,000 barrels per day.

Other forecasters also see an accelerated pace of oil storage next year, with FGE seeing an increase from 480,000 bpd this year to 600,000 bpd. The difference in figures is likely due to the fact that China does not publish official data on its oil in storage, leaving forecasters to make their own calculations based on whatever observable data and information is available. Reuters, for example, calculates oil in storage by subtracting imports from refinery operating rates, hence the average storage rate of 990,000 bpd.

This stockpiling by China has become one of the main reasons for the relative stability of oil prices this year. This stability has been based, among other things, on the quite reasonable assumption that if China, the world’s largest oil importer, has created a supply cushion in the event of a disruption, then an increase in demand after such a disruption is unlikely. This assumption has acted as a further barrier to pricing, along with regular reports of electric vehicles replacing internal combustion engines in the world’s largest car market.

Given that China is increasing the pace at which it stores oil, price stability will likely remain a feature of oil markets in 2026, not least because China can absorb much more crude oil in storage than it is currently storing. According to OilX, the country’s storage caverns are only half full, meaning there is plenty of room to increase that reserve buffer.

However, while many forecasters remain convinced that global oil demand growth is weakening, the International Energy Agency just released a report in which it revised its demand projections upward and its excess projections downward. Total global oil supply fell 610,000 bpd in November compared to October and a whopping 1.5 million bpd from September’s all-time high, the IEA noted in its latest monthly report. It still sees a supply glut of a substantial 3.84 million barrels a day, but that is less than a previously forecast glut of 4.09 million barrels a day, because oil demand is now seen as stronger. China and 2026 may still offer some surprises.

By Irina Slav for Oilprice.com

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