David Goldman writes:

A decline in Chinese demand for the world’s oil has weighed significantly on global oil prices.

That’s a big reason why crude never approached its 2022 prices or the record set in 2008, despite an oil shock several orders of magnitude larger than either of those preceding crises.

China relies almost entirely on imports for oil. But its crude imports have fallen dramatically during the course of the war, tumbling below 8 million barrels per day from more than 12 million a day before the war, according to maritime data company Signal Ocean Research.

Some of China’s oil-demand loss may be long-lasting. For example, demand for electric vehicles in the country exploded over the course of the war, and the number of EVs on the road surged by a third. China simultaneously placed strict restrictions on its refineries, limiting their output of gasoline, diesel and jet fuel.

But the China demand story is mostly one of extreme preparedness rather than the world’s second-largest economy turning its back on oil.

Ahead of the war, China built up its oil stockpiles and has been relying on that inventory for its crude needs — rather than imports — ever since. The country is drawing down its stockpiles at a rate of 2 million barrels per day but still has 1.9 billion barrels of oil left in its tanks, or 117 days’ worth of demand, according to Yulia Zhestkova Grigsby, senior commodities strategist at Goldman Sachs.

That’s why China’s “true” demand loss during the war is only about 1.2 million barrels per day — not the roughly 5 million that it stopped importing, Signal Ocean Research estimates. [Continue reading…]