Diesel Dilemma: Falling Demand In China And India Puts Pressure On Crude Oil Price
The diesel markets in China and India appear to be slowing down, which could result in lower prices for crude oil
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Chinese and Indian diesel markets, which account for the majority of Asian demand, are showing signs of downfall, possibly leading to more decline in crude oil prices. This unexpected plummet has prompted experts to reconsider the future of the diesel business.
India, which accounts for a significant portion of global diesel consumption, is experiencing a decrease in demand due to economic challenges and shifting energy trends. In fact, according to a flash report by the Petroleum Planning and Analysis Cell (PPAC), India’s diesel consumption has witnessed a significant dip of 2.87% Y-O-Y, decreasing from 6,670 TMT in August 2023 to 6,478 TMT in the same month this year.
China, the world's second-largest diesel consumer, is also experiencing a decline in demand. The country's economic slowdown, coupled with stricter emissions regulations and a push towards alternative energy sources, has resulted in a notable decrease in diesel consumption. This drop in demand has had a ripple effect on the global energy market, causing crude oil prices to fall.
Against both contexts, profits for regional refiners from processing Dubai crude into diesel have declined by more than 40% since the beginning of the year, according to Bloomberg Fair Value data.
“Tightening emission norms, fear of a complete ban on diesel vehicles, and near-parity in the price of petrol and diesel in the country is changing customers’ perceptions,” said Mudit Nautiyal, a senior research analyst at Wood Mackenzie Ltd. Longer term, demand faces risks from electrification, he said.
This is where the diesel dilemma serves as a wake-up call for the industry, highlighting the need for diversification and innovation.
