- Declining Chinese oil demand: The IEA’s forecast for Chinese oil demand growth in 2024 has been significantly revised downward due to factors like increased EV and LNG truck adoption, a slowdown in industrial activity, and weaker consumer spending.
- Shift in crude import patterns: Chinese crude imports from regions west of Suez have decreased, while imports from nearby sources like the Arabian Gulf and Russia have grown, leading to reduced tonne-mile demand.
- Sanctioned oil trade: A significant share of China’s imports comes from the “grey fleet,” transporting sanctioned oil from countries like Russia, Iran, and Venezuela.
- Tanker market trends: Rates for crude tankers have fluctuated regionally, influenced by geopolitical factors, shifts in demand, and supply constraints.
Declining Chinese Oil Demand
According to Gibson, lackluster oil demand from China has been a leading factor impacting tanker markets throughout 2024. The International Energy Agency (IEA) had initially forecast Chinese demand growth of 480 kbd for 2024, which has since been revised down to 150 kbd. This slowdown stems from the increased adoption of EVs and LNG trucks, reduced industrial activity, and weaker consumer spending.
Shift in Crude Import Patterns
Chinese crude imports have fallen by 440 kbd year on year, with a significant portion potentially directed into inventories. Refinery runs in China have been below expectations, affecting CPP exports and the broader clean tanker market.
There has also been a notable shift in China’s crude sourcing. Imports from distant regions have decreased, while imports from nearby areas like the Arabian Gulf and Russia have increased. For instance:
- In 2019, China imported 3.8 mbd of crude from ports west of Suez and 5.2 mbd from east of Suez.
- By 2024, imports from the west dropped to 3.1 mbd, while imports from the east rose to 7 mbd.
This change in sourcing has likely reduced tonne-mile demand, even amid geopolitical disruptions such as China’s zero-COVID policy, the Russian invasion of Ukraine, and Red Sea instability.
Sanctioned Oil Trade and Grey Fleet Usage
China’s imports from sanctioned sources like Russia and Iran have surged, with Iranian imports rising from 360 kbd in 2019 to 1.2 mbd in 2024. At the same time, imports from regions like West Africa and Latin America have declined due to reduced production.
The rise of the “grey fleet,” which transports sanctioned oil, has significantly influenced global crude dynamics. Shorter-haul trade patterns now dominate, replacing long-haul exports to China.
Tanker Market Trends
Crude Tankers
- VLCCs : Rates in the Arabian Gulf and West Africa improved slightly due to thinning tonnage lists, with AG/China routes at WS55 and WAF/China runs at WS56.
- Suezmaxes : Saw some activity but remained under pressure.
- Aframaxes : Experienced downward trends in the East and Mediterranean markets.
Clean Products
Mixed performance in the Mediterranean and UKC markets. Activity increased towards the week’s end, particularly for Med/TA routes.
Dirty Products
Rates firmed in the north and Mediterranean due to tighter tonnage lists and increased activity. Struggled with fewer inquiries compared to other vessel classes.
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Source: Gibson Shipbrokers
