Has China’s Oil Demand Peaked? EVs, Petrochemicals and Refining

Has China's oil demand peaked? What the forecasters say

For two decades China drove global oil consumption. The International Energy Agency (IEA) says Chinese demand rose by nearly 6 million barrels per day (b/d) between 2015 and 2024, 60% of the global increase. In its medium-term report published in June 2025, it said China's oil demand "is on track to peak this decade", with 2030 consumption only slightly above 2024. It cited a surge in electric vehicle (EV) sales and the spread of trucks running on liquefied natural gas (LNG) ^[1].

China's state oil companies go further for transport fuels. CNPC's Economic & Technology Research Institute (ETRI) said in January 2025 that refined product demand had peaked in 2023. It forecast a 1.9% fall in 2025, with gasoline down 3.4% and diesel down 3% ^[2].

Sinopec's Economics and Development Research Institute (EDRI) expects a much sharper fall in 2026. It forecasts refined product demand down about 600,000 b/d, or 8.9%, the third consecutive annual decline. Gasoline is expected to fall 8.7% to 149 million tonnes and diesel 11.4% to 164 million tonnes ^[3]. EDRI vice president Fairy Wang said China now has to "accept a better economy with no growth" in oil demand ^[3].

The 2026 figures combine a price shock with a structural shift. Kpler estimates that gasoline and diesel demand will fall by around 440,000 b/d this year, half of China's total liquids decline. It also estimates that EVs and alternative-fuel trucks will displace about 1.3 million b/d of road fuel: 650,000 b/d of gasoline and 680,000 b/d of diesel ^[5].

How fast are EVs cutting China's gasoline demand?

New-energy vehicles (NEVs), which include battery electric cars and plug-in hybrids, made up more than half of passenger car sales in 2025. Their share dipped below 50% early this year, as the car market weakened and the full purchase-tax exemption was replaced by a 50% reduction ^[5].

The war changed the economics. Gasoline retail prices were about 22% above year-earlier levels in the second quarter, and gasoline demand fell about 8% year on year. NEV sales fell 12% in January–July, but sales of conventional cars fell 42%. As a result, the NEV share of sales rose from below 46% in January to about 83% in July ^[5]. Sinopec EDRI, on its own measure, put EV penetration at 65% in July and EVs at about 15% of the total vehicle fleet ^[3].

Kpler expects EVs to reach almost 20% of the passenger car fleet by the end of 2026 and 22% in 2027. It forecasts gasoline demand to fall about 210,000 b/d in 2026 and a further 70,000 b/d in 2027, even if prices normalise ^[5].

Trucks: LNG, electricity and the decline in diesel

Diesel has been falling for longer. CNPC ETRI expected LNG heavy trucks to displace around 28–30 million tonnes of diesel in 2025, more than 15% of total demand ^[2].

The war accelerated the shift. By early May, retail diesel prices had risen 27% since the conflict began ^[6]. LNG trucks took about 37% of heavy truck registrations in March. But LNG prices followed oil higher, and by July LNG's share had fallen to about 11%. Electric trucks filled the gap, reaching about 47% of heavy truck registrations in July ^[5]. Sinopec EDRI noted that battery range has risen to 300–500 km per charge, from 100–200 km previously ^[3].

Freight and fuel use are now moving in different directions. Road freight turnover grew about 3% in January–July, yet Kpler expects diesel demand to fall about 230,000 b/d in 2026. It estimates that LNG and electric heavy trucks will displace close to 680,000 b/d of diesel this year. Electric trucks will be only about 8% of the heavy truck fleet by year-end, but they are gaining ground in intensive uses such as ports, mines and industrial routes. Kpler sees a diesel recovery of only about 64,000 b/d in 2027 ^[5].

Petrochemicals and jet fuel: where growth remains

Before the war, petrochemicals were set to provide all of China's oil demand growth. In January, Kpler forecast that China's liquids demand would rise about 360,000 b/d in 2026, led entirely by petrochemicals. Feedstock demand was expected to grow by 410 kb/d: ethane by 128 kb/d, LPG by 94 kb/d and naphtha by 180 kb/d. Core refined products were expected to fall by 50 kb/d ^[7].

The Gulf disruption hit those feedstocks. The Middle East supplies about 40% of China's naphtha imports and 45% of its LPG imports, according to Columbia University's Center on Global Energy Policy. China responded by importing more ethane from the United States, which reached a record in April ^[8]. Kpler said LPG and naphtha demand took a substantial hit, while ethane consumption held up ^[5]. Coal-to-chemicals, which avoids oil feedstock, is part of the 15th Five-Year Plan for 2026–2030 ^[8].

Jet fuel is the only major transport fuel still growing. CNPC ETRI expected it to lead growth in 2025 ^[2]. Sinopec EDRI now expects 2026 jet fuel demand to rise 1.3% to 41.55 million tonnes, below its earlier forecast of 3–4% growth ^[3,4].

Refining capacity cap and teapot rationalisation

Beijing set a cap of 1 billion tonnes a year on refining capacity from 2025 ^[10], equivalent to about 20 million b/d ^[8]. It plans to close smaller refineries to make room for larger petrochemical complexes ^[8].

Independent refiners, known as teapots and mostly based in Shandong, account for about a quarter of the industry. They ran at 54% of capacity in 2024 ^[9]. Sinopec EDRI expects small and medium refineries with simple product slates to exit, removing 80–100 million tonnes a year. It forecasts national capacity falling from 952 million tonnes a year in 2026 to 900–910 million tonnes by end-2030 ^[3].

Progress has been uneven. Bloomberg reported in 2025 that Shandong had restored some tax rebates, that one of three bankrupt plants had resumed production and that the other two were preparing to restart under new owners ^[10]. Columbia's researchers suggest the Hormuz disruption could lead China to postpone some closures as a form of energy security insurance, at a cost to utilisation and profitability ^[8].

Product export quotas: China's balancing valve

Export quotas let Beijing balance domestic supply. The first 2026 batch, issued in December 2025, covered 19 million tonnes of gasoline, diesel and jet fuel, steady on a year earlier ^[11]. A second batch of 13 million tonnes in June took the total to 32 million tonnes ^[12]. Restrictions introduced in early March tightened supply in global jet fuel markets, where China accounts for about 20% of trade ^[8].

Exports have lagged the quotas. Sinopec EDRI said temporary controls held January–July exports to 14.36 million tonnes, against 37 million tonnes of quotas issued in January and June by its count ^[3]. Mysteel, citing GL Consulting, reported that the third batch was about 50% smaller than a year earlier, and that more than 9 million tonnes of the second batch were still unused in September ^[13].

What it means for global oil demand in 2026–2027

The International Energy Forum (IEF) compares the three main monthly outlooks. In October, the IEA expected global demand to fall 2.6 million b/d in 2026 and the EIA 2.0 million b/d, while OPEC expected growth of 0.2 million b/d. For China, the IEA projects a 2026 decline of 0.49 million b/d, the EIA 0.56 million b/d and OPEC 0.06 million b/d ^[14].

All three expect a rebound in 2027: 2.0 million b/d for the IEA, 2.2 million b/d for the EIA and about 2.6 million b/d for OPEC. China contributes between 0.27 and 0.54 million b/d of that growth ^[14]. The EIA's October outlook shows supply exceeding demand by 4.91 million b/d in 2027 ^[15].

The pattern of Chinese growth is also changing. If Kpler's forecasts are correct, gasoline will keep falling in 2027 and diesel will recover only partly. Petrochemical feedstocks such as ethane, LPG and naphtha, which Kpler does not expect to decline this decade, will matter more ^[5,7]. For crude exporters and refiners, Chinese demand growth is likely to depend more on chemical plants than on cars and trucks.

What to watch

• NEV sales: whether high shares hold as fuel prices ease and the halved purchase-tax break continues through 2027 ^[5,7].
• The diesel–LNG spread: a key driver of truck purchases ^[5].
• Export quotas: fourth-quarter shipments and the first 2027 batch ^[13].
• Refinery closures: progress under the capacity cap, especially in Shandong ^[3,10].
• Feedstock imports: ethane, LPG and naphtha flows as Gulf supply recovers ^[8].

Alupetra follows Chinese product demand, export quotas and refinery policy from its offices in Istanbul, London and Dubai.