Goldman Sachs sees China petrochemical oil demand decline reversing

Goldman Sachs has stated that the recent decline in China's oil demand from the petrochemicals sector may not be as permanent as the drop in gasoline and diesel consumption. Nearly a third of the second quarter decline has already begun to recover by August. While gasoline and diesel demand is expected to remain low as long as China's product prices stay high, the petrochemicals sector faces different dynamics.

Goldman Sachs estimates that feedstock switching contributed only 19% to the decline in China's petrochemical oil demand, while naphtha-to-ethane switching accounted for only 8%. The majority, at 73%, was due to lower production of petrochemical products. This decline was likely a result of downstream destocking, which is not sustainable in the long term, and perhaps some price-induced demand reduction.

Goldman Sachs noted that the drop in China's oil end-use demand has reduced the global oil deficit and eased upward pressure on crude prices following the Hormuz shock. The bank attributes much of the weakness in China's gasoline and diesel consumption to fuel switching, including increased adoption of electric vehicles. This report was produced with AI assistance and reviewed by a human editor.