China's diesel demand fell by 11% year over year in June, reaching 3.9 million barrels per day, marking the largest percentage drop since July 2021, according to the U.S. Energy Information Administration (EIA). This decline has had a significant impact on global oil markets, which had anticipated continued growth from the world's second-largest economy.

The Organization of Petroleum Exporting Countries (OPEC) recently lowered its 2024 oil demand forecast, citing softer expectations for China?this being the first reduction since the outlook was published over a year ago. Similarly, the Paris-based International Energy Agency (IEA) cut its 2025 forecast, also pointing to a weakening Chinese economy.

Diesel consumption in China had reached an all-time high last year, but demand has sharply declined since the second quarter of this year. The EIA attributes this slump to two primary factors: the country's struggling property sector, which has slowed economic growth, and the increasing use of liquefied natural gas (LNG) in heavy-duty trucks as a substitute for diesel.

"Apart from reduced diesel use due to slowing economic activity in the construction and property sectors, a small but growing share of China's trucking fleet is using LNG instead of diesel," the EIA reported.

Sales of LNG-powered trucks in China soared by 307% last year, reaching 152,000 units, according to data from Chinese information provider CV World. Consultancy FGE estimates that LNG will displace 110,000 to 120,000 barrels per day of diesel demand in China this year and the next.

Amid these shifts, Chinese refineries have faced challenges, with oil refinery output in July falling by 6.1% from a year ago, marking the fourth consecutive month of decline.

This downturn in diesel demand and refinery output underscores the broader economic challenges facing China and the shifting dynamics in the global energy market.