Market News

Bloomberg) -- Chinese oil imports may never fully recover from the Iran war, with analysts saying the conflict accelerated a permanent shift away from fuels like gasoline and diesel.

Rystad Energy estimates that 200,000 to 600,000 barrels a day of transportation demand lost during the conflict from the world’s biggest crude importer may not return this year. Energy Aspects Ltd. puts the permanent loss at about 300,000 barrels a day.

China’s crude imports will fall by 3.3 million barrels a day this quarter from a year earlier, according to FGE NexantECA, as supply disruptions coincide with a halt in stockpiling, run cuts and a ban on fuel exports. While much of that decline is down to slower stockpiling activity, losses in transport fuel demand are likely to be more durable. Imports of crude averaged around 12.6 million barrels a day in February.

The spike in oil prices in the early stages of the war looks to have accelerated the electrification of China’s transport fleet. Registrations of fully electric vehicles accounted for almost 42% of the total in April, from around 38% in March, according to the China Automotive Technology and Research Center. Prices for new and used gasoline cars have also slumped as the oil shock from the conflict cooled demand.

“Consumer behavior can be a bit sticky,” said Lin Ye, the vice president of oil markets at consultancy Rystad Energy. “For those who shifted to electric cars during the war, there might be little reason to switch back unless fuel prices becomes substantially cheaper.”

The war has also exposed how much of China’s oil demand had been driven by stockpiling rather than consumption. While inventory buying could return as Middle Eastern supplies recover, demand lost to electrification is unlikely to come back, potentially leaving China less able to absorb surplus barrels.

The implications extend far beyond China. Long viewed as the oil market’s buyer of last resort, the country helped cushion one of the largest supply shocks in decades by curbing imports and consumption during the war. As Middle Eastern crude returns, the extent to which Chinese buyers re-enter the market could become a key determinant of global oil prices.

Part of the crude demand recovery could come from renewed stockbuilding, higher refinery runs and potentially looser fuel export curbs. Industry consultant JLC said that Beijing is likely to ease wartime restrictions on fuel exports, with about 17 million tons of quota still available this year, paving the way for gasoline and diesel shipments to return toward pre-war levels.