Vitol Sees Chinese Gasoline Demand Peaking This Year or Next

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(Bloomberg) — China’s gasoline use is set to start fading, adding to concerns about tepid oil demand relative to supply, according to trading behemoth Vitol Group.

“Gasoline is likely to peak this year or next year in China — not because nobody’s moving, but simply because the fleet is slowly changing towards electric vehicles,” Chief Executive Officer Russell Hardy said in an interview.

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Oil watchers across the globe are closely monitoring demand in China, particularly against the backdrop of the energy transition. Crude prices last week slumped to their lowest since 2023, in part because of lackluster economic performance in the world’s top oil importer. The subject will be a key topic this week at the APPEC conference in Singapore, the biggest annual gathering for the region’s oil industry.

Meanwhile, US crude production is at near-record levels, and the OPEC+ coalition has postponed its output hikes by two months amid demand concerns. Vitol, the world’s biggest independent oil trader, sees the market well-supplied for at least the next two years. 

“People are concluding it’s not going to be an easy environment for them over the next 12 months unless there is a supply shock,” Hardy said in reference to the Organization of Petroleum Exporting Countries and its allies. For now, “the market isn’t too worried about supply for ‘25 and ‘26.”

READ: OPEC’s Quick Fix Masks Bigger Worry: Too Much Oil Next Year

Vitol has pushed back the date when it expects overall global oil demand to peak to the 2030s, and Hardy said growth should remain reasonably strong for the next few years. Still, he saw pockets of weakness in Chinese gasoline and diesel demand, where oil products are being replaced by electric vehicles and LNG-fueled trucks.

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Oil demand growth globally is set to slip to about 1.1 million barrels a day by next year, from a forecast of 1.65 million barrels this year, according to Hardy. Much of that growth will come from developing countries, he said.

Fading Volatility

Vitol is emerging from the most profitable period in its history as the combined turmoil of global pandemic and Russia’s invasion of Ukraine made for huge dislocations in energy markets. Now, Hardy noted, that period is drawing to a close.

“This year the market has been much more organized, much more stable and the trade flows and patterns are more predictable,” he said. “Volatility has reverted back much closer to the mean, and opportunity within trading companies has some proportionality to that.”

To combat that slowdown and to invest some of the huge cash pile built up in recent years, Vitol has been buying into assets that should prop up margins in leaner, less volatile times. It’s snapping up an oil refinery, fueling stations, LNG infrastructure and even another trading firm — as we as distributing large payouts to the roughly 450 senior executives who own the company. 

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Vitol has kept its volumes of traded oil stable despite losing access to most of its barrels from Russia which was “a big part of our business,” instead supplementing with “a lot more” from the US and East of Suez, Hardy said. It’s also looking at expanding to other commodities – the firm wants to trade copper as well as aluminum and iron ore and is growing in LNG, he added. 

The firm, known as one of the most financially conservative commodity traders, has retained much of its blockbuster profits and has also seen group equity more than double in two years, to $32.5 billion at the end of 2023. Now, Hardy hinted, it may be ready to see that number fall — potentially opening the way to further bumper payouts to its employee-shareholders

“It’s reasonable to assume that we’re adjusting our expectations of market volatility and how that impacts our funding and finances,” he said.

—With assistance from Grant Smith.

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