{"id":61596,"date":"2024-01-05T13:25:52","date_gmt":"2024-01-05T21:25:52","guid":{"rendered":"https:\/\/energi.media\/?p=61596"},"modified":"2024-01-05T13:25:52","modified_gmt":"2024-01-05T21:25:52","slug":"chinas-petrochemical-surge-is-driving-global-oil-demand-growth","status":"publish","type":"post","link":"https:\/\/energi.media\/news\/chinas-petrochemical-surge-is-driving-global-oil-demand-growth\/","title":{"rendered":"China\u2019s petrochemical surge is driving global oil demand growth"},"content":{"rendered":"<p><em>This article was published by the <a href=\"https:\/\/www.iea.org\/commentaries\/china-s-petrochemical-surge-is-driving-global-oil-demand-growth?fbclid=IwAR0ElVSNY04iaH37Gsv_d7nIDOPSO1zKHFbN7r0D13Wx0xB0Jw9OQQDY-sc\" target=\"_blank\" rel=\"noopener\">International Energy Agency<\/a> on Dec. 19, 2023.<\/em><\/p>\n<p><em><strong>By <a class=\"a-link a-link--small \" href=\"https:\/\/www.iea.org\/contributors\/ciaran-healy\" data-focus-tabbed=\"\" data-panel-open=\"\"><span class=\"a-link__label\">Ciar\u00e1n Healy, Oil Market Analyst<\/span><\/a><\/strong><\/em><\/p>\n<h4 class=\"m-block__title f-title-5\">Seismic shifts are taking place in the global petrochemical sector<\/h4>\n<p>The global petrochemical industry \u2013 essential to the production of clothing, tyres, detergents, fertilizers, and countless other everyday products \u2013 is currently going through a momentous period of transition. Driving this change is a towering wave of new petrochemical plants, most notably in China. This is shifting oil demand to the country as it increases production of plastics and synthetic fibres, while generating increasingly cutthroat competition among those that previously dominated the market.<\/p>\n<p>The speed and scale of the expansion of China\u2019s petrochemical sector dwarfs any historical precedent, roughly doubling the pace of earlier capacity additions in the Middle East and United States. Between 2019 and 2024, China is set to add as much production capacity for ethylene and propylene \u2013 the two most important petrochemical building blocks \u2013 as presently exists in Europe, Japan and Korea combined.<\/p>\n<figure id=\"attachment_61597\" aria-describedby=\"caption-attachment-61597\" style=\"width: 601px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-61597\" src=\"https:\/\/energi.media\/wp-content\/uploads\/2024\/01\/oil-demand-chart-1.png\" alt=\"\" width=\"601\" height=\"316\" srcset=\"https:\/\/energi.media\/wp-content\/uploads\/2024\/01\/oil-demand-chart-1.png 2774w, https:\/\/energi.media\/wp-content\/uploads\/2024\/01\/oil-demand-chart-1-300x158.png 300w, https:\/\/energi.media\/wp-content\/uploads\/2024\/01\/oil-demand-chart-1-1024x538.png 1024w, https:\/\/energi.media\/wp-content\/uploads\/2024\/01\/oil-demand-chart-1-768x404.png 768w, https:\/\/energi.media\/wp-content\/uploads\/2024\/01\/oil-demand-chart-1-1536x807.png 1536w, https:\/\/energi.media\/wp-content\/uploads\/2024\/01\/oil-demand-chart-1-2048x1076.png 2048w\" sizes=\"auto, (max-width: 601px) 100vw, 601px\" \/><figcaption id=\"caption-attachment-61597\" class=\"wp-caption-text\"><em>Appears in China\u2019s petrochemical surge is driving global oil demand growth<\/em><br \/><em>Sources: IEA (2023), Oil Market Report &#8211; December 2023, (accessed 14 December 2023), https:\/\/www.iea.org\/reports\/oil-market-report-december-2023.\u00a0 To see an animated version of this graph, <a href=\"https:\/\/www.iea.org\/commentaries\/china-s-petrochemical-surge-is-driving-global-oil-demand-growth?fbclid=IwAR0ElVSNY04iaH37Gsv_d7nIDOPSO1zKHFbN7r0D13Wx0xB0Jw9OQQDY-sc\" target=\"_blank\" rel=\"noopener\">click here<\/a>.<\/em><\/figcaption><\/figure>\n<p>The structural transformation of the petrochemical industry has been reshaping global patterns of oil consumption. Global oil use in 2023 has decisively surpassed pre-Covid levels, rising to 1\u00a0million barrels per day (mb\/d) above where it stood in 2019. However, this is largely being driven by petrochemical demand and is especially concentrated in China. In 2023, demand for petrochemical feedstocks such as naphtha, liquefied petroleum gas (LPG) and ethane in the country will average 1.7\u00a0mb\/d more than in 2019. Were it not for the sector\u2019s rapid growth, total oil consumption would remain comfortably short of the pre-pandemic mark.<\/p>\n<figure id=\"attachment_61598\" aria-describedby=\"caption-attachment-61598\" style=\"width: 600px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-61598\" src=\"https:\/\/energi.media\/wp-content\/uploads\/2024\/01\/oil-demand-chart-2.png\" alt=\"\" width=\"600\" height=\"324\" srcset=\"https:\/\/energi.media\/wp-content\/uploads\/2024\/01\/oil-demand-chart-2.png 2776w, https:\/\/energi.media\/wp-content\/uploads\/2024\/01\/oil-demand-chart-2-300x162.png 300w, https:\/\/energi.media\/wp-content\/uploads\/2024\/01\/oil-demand-chart-2-1024x553.png 1024w, https:\/\/energi.media\/wp-content\/uploads\/2024\/01\/oil-demand-chart-2-768x415.png 768w, https:\/\/energi.media\/wp-content\/uploads\/2024\/01\/oil-demand-chart-2-1536x830.png 1536w, https:\/\/energi.media\/wp-content\/uploads\/2024\/01\/oil-demand-chart-2-2048x1107.png 2048w\" sizes=\"auto, (max-width: 600px) 100vw, 600px\" \/><figcaption id=\"caption-attachment-61598\" class=\"wp-caption-text\"><em>To see an animated version of this graph, <a href=\"https:\/\/www.iea.org\/commentaries\/china-s-petrochemical-surge-is-driving-global-oil-demand-growth?fbclid=IwAR0ElVSNY04iaH37Gsv_d7nIDOPSO1zKHFbN7r0D13Wx0xB0Jw9OQQDY-sc\" target=\"_blank\" rel=\"noopener\">click here<\/a>.<\/em><\/figcaption><\/figure>\n<h4 class=\"m-block__title f-title-5\">Rising production in China is shifting global trade patterns<\/h4>\n<p>As China\u2019s petrochemical sector expands, demand for feedstocks derived from oil is shifting to the country from other longstanding petrochemical centres. It is also significantly affecting global markets for the products made from petrochemicals, such as plastics, synthetic fibres and their intermediates.<\/p>\n<p>China has long been the world\u2019s largest polymer and synthetic fibre importer, accounting for the equivalent of almost 3 mb\/d in feedstock terms, or 3 per cent of global oil consumption, in 2019 and 2020. Now, its previous suppliers are under pressure after recent increases in Chinese production, in particular during 2023. Petrochemical activity and related oil demand fell in other regions, including the Middle East and the rest of Asia. Shipments of intermediate and final petrochemical products declined by almost 30 per cent from these parts of the world during the first nine months of 2023 compared with the same period in 2019.<\/p>\n<p>European petrochemical producers are not themselves major exporters to East Asia, but the reorganization of trade has severely impacted the region. Operating rates appear to be unsustainably low, with many plants struggling to break even. Deliveries of naphtha, transformed into ethylene and propylene by European steam crackers, have fallen by almost 30 per cent since 2021 to levels not seen since the mid-1970s.<\/p>\n<p>Shipments of intermediate and finished petrochemical products to Europe from the Middle East and East Asia, excluding China, have risen slightly \u2013 but, in part due to weak local demand for plastics, Europe does not appear able to absorb the additional supply. Production across all these regions has slowed, although declines in Europe have been the largest.<\/p>\n<figure id=\"attachment_61599\" aria-describedby=\"caption-attachment-61599\" style=\"width: 601px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-61599\" src=\"https:\/\/energi.media\/wp-content\/uploads\/2024\/01\/oil-demand-chart-3.png\" alt=\"\" width=\"601\" height=\"324\" srcset=\"https:\/\/energi.media\/wp-content\/uploads\/2024\/01\/oil-demand-chart-3.png 2774w, https:\/\/energi.media\/wp-content\/uploads\/2024\/01\/oil-demand-chart-3-300x162.png 300w, https:\/\/energi.media\/wp-content\/uploads\/2024\/01\/oil-demand-chart-3-1024x552.png 1024w, https:\/\/energi.media\/wp-content\/uploads\/2024\/01\/oil-demand-chart-3-768x414.png 768w, https:\/\/energi.media\/wp-content\/uploads\/2024\/01\/oil-demand-chart-3-1536x828.png 1536w, https:\/\/energi.media\/wp-content\/uploads\/2024\/01\/oil-demand-chart-3-2048x1104.png 2048w\" sizes=\"auto, (max-width: 601px) 100vw, 601px\" \/><figcaption id=\"caption-attachment-61599\" class=\"wp-caption-text\"><em>To see an animated version of this chart, <a href=\"https:\/\/www.iea.org\/commentaries\/china-s-petrochemical-surge-is-driving-global-oil-demand-growth?fbclid=IwAR0ElVSNY04iaH37Gsv_d7nIDOPSO1zKHFbN7r0D13Wx0xB0Jw9OQQDY-sc\" target=\"_blank\" rel=\"noopener\">click here<\/a>.<\/em><\/figcaption><\/figure>\n<h4 class=\"m-block__title f-title-5\">Higher US supply is helping meet Chinese demand<\/h4>\n<p>In striking contrast, US producers have substantially increased exports of petrochemical feedstocks, intermediates and polymers. This includes flows to both China and Europe from the expanded American steam cracker fleet, which has been another increasingly disruptive force in global markets. Soaring domestic availability of ethane and propane, the most important US feedstocks, has outpaced increases in consumption, keeping processing margins strong and supporting rising exports. Ethane used in US plants now accounts for more than 2 per cent of global oil demand, doubling over the past decade.<\/p>\n<p>The advantages of this burgeoning feedstock supply have helped US producers expand their global market share. Huge volumes of US ethane and propane have poured into China since the pandemic, approaching three-quarters of the nation\u2019s imports of these products and meeting more than one-third of the increase in China\u2019s overall feedstock demand compared with 2019.<\/p>\n<p>This trend is mirrored in US exporters\u2019 growing dependence on China\u2019s appetite for ethane and propane. More than three-quarters of the 2019\u201123 increase in these shipments has gone to China. This symbiosis between the largest global source of demand growth \u2013 China \u2013 and the largest global source of supply growth \u2013 the United States \u2013 has enabled the petrochemical sectors in both countries to flourish in a way that would not otherwise have been possible.<\/p>\n<h4 class=\"m-block__title f-title-5\">Petrochemical activity masks other oil market trends<\/h4>\n<p>The magnitude of the surge in petrochemical activity risks masking major shifts in global oil markets that have already begun to take hold. These structural changes have brought a peak in global oil demand into view this decade, according to analysis in the IEA\u2019s\u00a0<a href=\"https:\/\/www.iea.org\/reports\/oil-2023\" rel=\"noopener noreferrer\">medium-term\u00a0<em>Oil 2023<\/em>\u00a0report<\/a>\u00a0and the latest\u00a0<a href=\"https:\/\/www.iea.org\/reports\/world-energy-outlook-2023\" rel=\"noopener noreferrer\"><em>World Energy Outlook<\/em><\/a>.<\/p>\n<p>One consequence of the growing role of petrochemicals is that carbon dioxide (CO<sub>2<\/sub>) emissions from oil will likely peak before overall demand. Petrochemical products are not primarily used as fuels, which means they are not a large source of direct emissions, though they can result in other environmental problems.<\/p>\n<p>Despite marked growth in the world\u2019s economy and population, global oil demand excluding petrochemical feedstocks remains lower than in 2019 and has grown little since 2017. Personal mobility and industrial activity now exceed pre-pandemic levels, but this is outweighed by strong improvements in the energy efficiency of engines, surging sales of electric vehicles and behavioural changes like more widespread teleworking.<\/p>\n<p>IEA projections show that global road fuel use is set to decline from 2025. Total oil consumption by advanced economies is already nearly 10 per cent below 2007 levels and shows no sign of recovering, even to its 2019 mark. Oil use is also expected to plateau before 2030 in China, long the driving force of rising global demand, with economic growth slowing and becoming less reliant on infrastructure and heavy industry.<\/p>\n<p>These changes are set to bring an overall peak in global oil demand this decade despite growing demand for petrochemicals \u2013 which, while substantial, is not expected to alter the broader direction of travel.<\/p>\n","protected":false},"excerpt":{"rendered":"<div class=\"mh-excerpt\"><p>This article was published by the International Energy Agency on Dec. 19, 2023. By Ciar\u00e1n Healy, Oil Market Analyst Seismic shifts are taking place in the global petrochemical sector The global petrochemical industry \u2013 essential <a class=\"mh-excerpt-more\" href=\"https:\/\/energi.media\/news\/chinas-petrochemical-surge-is-driving-global-oil-demand-growth\/\" title=\"China\u2019s petrochemical surge is driving global oil demand growth\">[Read more]<\/a><\/p>\n<\/div>","protected":false},"author":6,"featured_media":61600,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"give_campaign_id":0,"footnotes":""},"categories":[1],"tags":[91,14,565,606,536,301],"class_list":{"0":"post-61596","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-news","8":"tag-china","9":"tag-featured","10":"tag-iea","11":"tag-industry","12":"tag-manufacturing","13":"tag-petrochemicals"},"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - 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