China’s Diesel Demand Likely to Have Peaked as LNG Use in Trucking Soars

Chinese diesel demand has already peaked, earlier than expected, as the use of LNG as a fuel in heavy-duty vehicles has been surging in recent months, analysts tell the Financial Times.

LNG has started to displace diesel as the fuel of choice in trucking, especially in northern China, according to industry experts and officials.

Daimler Truck of Germany, one of the biggest truck manufacturers in the world, has seen an “absolute catastrophic market” in China recently, as it doesn’t have a natural gas-powered engine on offer, the German company told analysts in August, FT reports.

The property sector crisis and the rise of LNG use in trucking have weighed on China’s diesel demand all this year, dampening the prospects of oil demand growth in the world’s top crude importer, which has been a key driver of global demand growth for years.

Diesel demand in China is particularly weak and analysts expect it to remain weak for the rest of the year.

Gasoline demand may be plateauing, but diesel demand is outright falling, according to analyst projections.

China’s diesel demand in the second half of 2024 is set to decline by between 2% and 7% on an annual basis, according to four out of five analysts in a Reuters survey.

LNG-fueled heavy-duty vehicles are set to limit diesel use for transport, especially now that LNG is cheaper than diesel.

Chinese sales of LNG trucks have been booming in recent months, as global and Asian LNG prices are much lower than the record highs seen at the peak of the energy crisis in the summer of 2022.

China’s oil demand growth has been slowing due to weaker economic performance and a shift to electric vehicles and LNG-fueled trucks.

Demand for petroleum products in China could peak before next year, the research unit of the China National Petroleum Corporation (CNPC) forecast earlier in 2024. The projection is based on expectations that the energy transition will continue gathering speed, eliminating oil product demand growth.

By Tsvetana Paraskova for Oilprice.com

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