China’s crude oil imports are set to recover from August after plunging to their lowest level in eight years during the Middle East conflict, according to JPMorgan , as more than half of the decline in China’s crude demand seen since the war may prove temporary. The country’s crude imports shrank by an unprecedented 4.8 million barrels per day (mbd) between February and May — a steeper drop than the 4 mbd decline seen during the depths of the pandemic in the second half of 2020 — Parsley Ong, JPMorgan’s head of Asia energy & chemicals research, said in a note on Wednesday. The pullback in purchases by the world’s largest crude importer has helped absorb some of the global energy shock and cap the surge in oil prices since the war began. In May, China’s oil imports slid to 7.8 mbd, the lowest since December 2017, as Beijing drew down domestic oil inventories for the first time in more than a year. Vessel-tracking data suggest imports remained around 8 mbd in June, implying a further 3 mbd inventory drawdown. JPMorgan estimates that around 3 mbd of the decline in crude demand is temporary, with a gradual recovery expected from August as chemical-sector demand rebounds and China seeks to replenish its strategic petroleum reserve. At the same time, JPMorgan lowered its outlook for China’s gasoline and diesel consumption, forecasting annual declines of 6% and 4%, respectively, through 2030, both steeper than its prior forecasts. Among energy producers set to benefit from China’s recovering oil demand, JPMorgan’s top pick is the state oil giant PetroChina . The bank expects the company to pay a first-half dividend of 0.27 yuan ($0.04) per share, equivalent to an annualized yield of 6.4% for its Hong Kong-listed shares — well above a projected 4.8% yield for domestic rival Sinopec . In the chemicals sector, Taiwanese Nan Ya Plastics remains the bank’s preferred name, citing potential upside if the company wins customer qualification for advanced copper-clad laminate materials used in artificial intelligence servers later this year or in early 2027. JPMorgan also named LG Chem, South Korea’s biggest petrochemical company, as a laggard play as it rides the tailwinds of lower oil prices and improved demand for global energy storage systems. LG Chem shares have gained more than 4% so far this year, trailing global chemical peers such as Albemarle , which is up nearly 18%. The bank pointed to China’s exports of refined oil products as a swing factor in the second half of this year. Beijing ordered a ban on refined fuel exports in March to prioritize domestic supply as an escalating conflict in the Persian Gulf threatened crude oil security. “We believe China’s decision on whether to fully remove the ban on exports via general trade will largely hinge on its assessment of domestic supply availability and Hormuz flows,” Ong and team said in the note. Once Beijing’s ban on general-trade fuel exports is lifted, shipments could rise by as much as 88% to 160% from first-half levels, according to JPMorgan. However, actual volumes will hinge on export margins remaining positive, with independent refiners facing additional pressure if they lose access to discounted Iranian crude should U.S. sanctions ease.
