Having closely observed Asia’s oil markets for years, I believe the region is entering a transformative phase as we approach 2025. For decades, Asia, led by China, has driven global oil demand growth. However, the dynamics are shifting. China is now operating under what I call a “new normal, ” with oil demand growth expected to slow to just 200, 000 to 400, 000 barrels per day this year, a far cry from the explosive growth of 800, 000 to 900, 000 barrels per day seen in its peak years. China is also approaching or has already surpassed peak demand for diesel and gasoline, as the country transitions toward cleaner energy alternatives.
Meanwhile, India, though growing faster in percentage terms, operates from a much smaller base. With approximately 5.1 million barrels per day of oil demand compared to China’s 16.5 million, India’s incremental growth of 150, 000 to 200, 000 barrels per day cannot fill the gap left by a slowing China. In the refining sector, I see significant challenges ahead. Even amid economic headwinds, Asia continues to expand its refining capacity, leading to oversupply in markets like China. Smaller “teapot” refineries are particularly vulnerable, facing fierce competition from high-complexity refineries in the Middle East and Africa, such as the Dangote refinery. These new facilities are better integrated with petrochemical operations and strategically positioned near key markets, giving them a competitive edge.
Geopolitical factors add another layer of uncertainty. Under a renewed Trump administration, I anticipate significant shifts that could impact discounted crude flows from Russia, Iran, and Venezuela, key suppliers for Asian refiners. While Indian refiners have benefited from discounted Russian oil, any easing of sanctions on Moscow or renewed pressure on Iran could reduce these advantages. For China, declining Iranian crude imports and shrinking refining margins compound the challenges. In my view, 2025 will be a pivotal year for Asia’s oil and refining markets. The region faces a perfect storm of overcapacity, shrinking margins, and
geopolitical uncertainty. How Asia adapts to these pressures will not only shape its energy landscape but also influence global markets for years to come.