India's oil demand set to surpass China's
What's the story
India's oil demand is likely to outpace China's this year, according to Trafigura Group. The prediction was made by Chief Economist Saad Rahim during an event hosted by S&P Global Commodity Insights on Monday. He said that "this year, Indian demand is set to outstrip China's if you exclude strategic stockpiling."
Market dynamics
Role in global demand growth
India and China, the region's top crude importers, are major contributors to demand growth. The two countries are at the center of how producers and traders adapt to economic changes and the rise of renewable energy. India's growth is fueled by urbanization and rising incomes, while China's crude consumption growth is slowing down, except for petrochemicals.
Strategic reserves
China's stockpiling supports overall consumption growth
Despite the slowdown in crude consumption growth, China's overall consumption growth this year has been supported by consistent builds in stockpiles. These include both commercial and strategic reserves. Frederic Lasserre, Global Head of Research and Analysis at Gunvor Group, said that the stockpiling of some 200,000 barrels per day in recent months has helped support demand.
Reserve concerns
Concerns over long-term sustainability of China's demand absorption
Lasserre also noted that "today, China is willing to stockpile and increase their SPRs," referring to strategic petroleum reserves. However, he warned that it may not be sustainable in the long run. The country might not be able to absorb all of the impending market surplus, which could pose a challenge for future demand absorption as more supply comes onto the market.