China’s jet fuel demand has experienced a significant surge as airline traffic continues to recover from the impacts of the pandemic. This surge has provided a much-needed boost to the country’s refining sector, which has been grappling with weak demand in other fuel segments.
Despite the strong growth in jet fuel demand, overall oil demand in China remains weak, primarily due to a slowing economy and lower consumption of gasoline and diesel. The rebound in jet fuel demand has helped to offset some of the weakness in other fuel segments, but it is not sufficient to reverse the overall bearish trend in China’s oil market.
China’s airline traffic has been on the rise this year, leading to a boost in jet fuel demand. This increase in demand has been a bright spot in transportation fuel consumption in the world’s top importer. Chinese refiners, facing depressed refining margins for producing gasoline and diesel, are now focusing on increasing jet fuel output to capitalize on the higher margins in this segment.
While the rising jet fuel demand is a positive development, it is important to note that jet fuel constitutes a smaller share of China’s total fuel consumption compared to gasoline and diesel. The growth in jet fuel consumption may help to narrow the decline in gasoline and diesel demand, but it is unlikely to single-handedly lift Chinese oil consumption out of its tepid-demand period.
The faltering overall oil demand and lower crude imports in China can be attributed to weaker economic growth and lackluster fuel demand. The property crisis and lower-than-expected fuel demand have weighed on refining margins, leading independent Chinese refiners to reduce crude throughput.
Recent data shows that China imported an average of 9.97 million barrels of oil daily last month, marking a 12% decrease from the June figure and a 3% decline from the daily import average for July 2023. The apparent weaker demand and slowing imports in China have been significant factors affecting oil prices in recent months.
Overall, while the surging jet fuel demand in China is a positive development for the refining sector, it is not enough to offset the challenges posed by weak overall oil demand and slowing imports. The dynamics of the oil market in China continue to be influenced by various factors, and it remains to be seen how these trends will evolve in the coming months.