China’s focus is on long-term growth and investment in high-tech sectors.

President Xi is not relying on the property sector or consumption to drive China’s economy anymore. So, the stimulus measures we’ve seen will be just enough to keep China’s economy on a steady growth path of around 5%. We’ve seen commodities like steel, and oil, both suffer in China due to the weak property sector. Gasoil demand, which was already peaking, saw an acceleration in its downturn because of the property market struggles, and this trend will likely continue. While we expect some pick-up in China’s oil demand heading into Q4, mainly from aviation fuel and LPG, the overall outlook remains soft. China’s contribution to Asian oil demand growth will be closer to 30% this year, compared to around 80% in 2023.

Are Chinese refiners concerned about disruptions to Iranian oil?

One concern is the possibility of tighter sanctions and that’s exactly what we saw last week when the US sanctioned some of the vessels transporting crude from Iran to China. The US has been turning a blind eye over the past two to three years, and Chinese independent refiners have been taking in about 90% of Iran’s crude exports, with Iranian oil accounting for roughly 50% of their crude basket. More recently, because of the risks to Iran’s oil infrastructure, Iranian oil loadings have been declining. And with tighter vessel availability

Chinese refiners now expect even more tightness in Iranian oil supplies. As a result, they’ll need to look elsewhere, likely turning toward Russian ESPO crude. This won’t have a massive immediate impact because these refiners have been operating at lower run rates, but over time, we may see a gradual shift, especially if the situation persists.

Outlook for Asian LNG demand?

September is usually the time when people start buying for the winter months. However, we haven’t seen that yet because winter has been delayed and stocks are at healthy levels in both Asia and Europe. Additionally, we have nuclear plant restarts in Japan and South Korea and more Russian gas flowing into China, keeping LNG demand more subdued.