One of the most understated stories of 2026, and the reason why oil (and gas) aren't trading at persistently nosebleed levels (ignore diesel for the time being), has been China's unexpectedly weak oil demand. And while there has been much speculation surrounding the reason for this chronically weak oil demand, ranging from an accelerated - and offsetting - SPR drain, to a dramatic economic slowdown behind the scenes (or even in front of the scenes based on the latest dismal economic data), today for the first time we got a notable justification for this phenomenon coming from none other than the head of the nation’s - and world's - largest refiner, who said that China’s oil demand probably peaked last year, earlier than previous estimates.
Clean energy development, electrification and low-carbon goals mean that the country’s oil demand has probably already crested, Sinopec Chairman Hou Qijun said Monday at an earnings briefing in Hong Kong, quoted by Bloomberg.
The company had previously forecast usage to top out in 2027, while the government is targeting oil and coal consumption to reach their limits during the current five-year plan period, which runs through 2030.
“Next year, even if the US-Iran conflict eases up, things might recover, but it won’t hit last year’s level,” Hou said. “So it’s very likely demand peaked last year.”
Since China is the world’s largest oil importer, an earlier start to reducing consumption would help rein in its world-leading emissions while raising questions for the world’s top crude drillers.
Sinopec, known officially as China Petroleum & Chemical Corp., said in its earnings report on Sunday that road fuel demand plummeted in the first half as consumers shied away from higher prices and shifted to electric vehicles. The declines are expected to narrow a bit in the second half because of supportive economic policies, said Tian Hongbin, a senior vice president at the company.
Even as fuel demand drops, the company is making sure domestic supply needs are met, President Wan Tao said during Monday’s briefing. It’s diversifying crude sources away from the Middle East while working with its suppliers in the region on shipping routes safe from the violence of the Iran War. The refiner has received 11 oil tankers previously stuck in the Persion Gulf that were carrying a combined 2.76 million tons of crude, he said.
The company typically keeps about 20 days of crude storage for refining purposes, and 15 days of refined products for marketing, Wan said. Inventory levels have remained steady during the war, and Sinopec will continue to follow directions from the government on its commercial storage levels, he added.