China’s Roads Are Bustling Again, But Covid Concerns Still Linger

China is close to returning to pre-viruses levels for gasoline and diesel.

According to people with direct knowledge of the nation's energy industry, last month's consumption of the major transport fuels was close to June's levels. Half of China's total oil demand is accounted for by gasoline and diesel.

China's rebound offers a potential boost to global crude demand which could tighten the market further and drive prices higher. Despite the fact that the world's biggest oil importer still faces sporadic virus outbreaks, the nation will stick with its Covid Zero strategy, which relies on mass testing to stamp out infections.

The Chinese oil executives, who asked not to be identified because they aren't authorized to speak publicly, said gasoline demand last month was less than in June. Three years earlier, diesel consumption was 3.8 million barrels a day.

After the initial outbreak, demand for diesel and gasoline went back to pre-viruses levels. Flare-ups since then have tested fuel consumption, but a resurgence earlier this year sparked by the omicron variant led to strict restrictions in some cities.

As schools break for summer and more people get comfortable with driving, the pace of gasoline's demand recovery could accelerate. Heavy rain and heatwaves across the nation have affected diesel consumption.

In the 15 cities with the highest number of vehicle registration, traffic congestion last month was 9% higher than in the previous year. The figures show a rebound in Beijing and Shanghai, which were subject to lock downs recently.

Jet Fuel

Jet fuel demand is still lagging behind pre-viruses levels despite some signs of improvement. The flight cancellation rate at China's 20 biggest airports went down in April, but it rebounded in June.

Chinese officials said that the decision to cut the time for inbound travelers to be tested was not a sign that the country was reopening.

"Oil demand is likely to register a year-on-year contraction in June and July, but demand growth could flip back into positive territory again if China succeeds in avoiding major containment ramifications," said the director of Greater China oil market.

Sarah Chen and Alfred Cang aided in the project.