S&P Global Commodity Insights: Asia's oil demand revival bears the brunt of China's endless lockdowns

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29-04-2022

Asia's oil demand outlook for 2022 is starting to look dimmer than what it was a couple of months earlier, as China's strict lockdowns aimed at battling the resurgence of the COVID-19 pandemic overshadow positive oil demand signs emerging from the rest of Asia.
"Asian oil demand growth is expected to slow in 2022 as China's demand has been hit by a resurgence of COVID-19, with lockdown measures imposed across many major cities. Based on our latest April outlook, China's growth will be flat this year, after growing by 550,000 b/d in 2021," Lim Jit Yang, advisor for Asia-Pacific oil markets at S&P Global Commodity Insights, said.
Demand growth for the rest of Asia, excluding China, is expected to average 713,000 b/d this year, up from 660,000 b/d last year, despite the impact of high fuel prices, according to S&P Global's Platts Analytics.
"In contrast to China's zero COVID policy, many countries in the region continue to push for reopening of their economies," Lim said. "Nonetheless, the improvement from the rest of Asia will not be able make up for the vacuum left by China, with the region to see sharply lower growth this year versus 2021. Overall, we expect Asian oil demand to grow on year by 716,000 b/d in 2022, down from 1.2 million b/d in 2021," he added.
Platts Analytics has revised down Asia's oil demand growth forecast for 2022 to 716,000 b/d from the previous forecast of 1.08 million b/d, mainly due to China's consumption woes.

China pulls down growth

Market sources and analysts said China's crude demand is unlikely to recover in the near term as domestic demand remains weak, forcing refiners to cut throughput.
"We have revised down China's oil demand to almost no growth this year owing to the demand loss in Q2. It remains uncertain whether demand loss in Q2 will be compensated by demand recovery in H2. That will increase the possibility of further downward revisions," Wang Zhuwei, S&P Global Commodity Insights' Asia oil analytics manager, said.
S&P Global has estimated China's Q2 throughput, including crude and other feedstocks, to fall 4% year on year to 14 million b/d. In April, run rates at the country's four state-owned refiners fell to 76.4%, the lowest since 76.1% in April 2020, according to S&P Global data, while private integrated refineries have slashed throughout to as low as 70% from their highest levels of over 130% seen in the last two years.

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