China’s Energy Shift: Crude Oil Drops, Gas Demand Soars


China's Energy Shift: Crude Oil Drops, Gas Demand Soars

China is undergoing a major shift in its energy consumption, with crude oil demand slowing down and natural gas usage on the rise. Crude oil imports are expected to grow only modestly by 1% in 2025, mainly due to factors like the rise of electric vehicles and a slowing economy. Additionally, the surplus of crude oil China has in 2024 gives the country more flexibility in managing its reserves, potentially leading to less volatility in global oil prices, including those on MCX.

On the other hand, natural gas is seeing a significant increase in demand, particularly in transportation and industrial sectors, as China continues its push towards cleaner energy. By 2030, a larger portion of vehicles and trucks will run on natural gas, further driving up its consumption. As China reduces its dependence on crude oil and boosts natural gas imports and domestic production, it could lead to higher prices for natural gas on MCX, reflecting China’s growing influence in the global energy market. This shift signals a larger global move toward cleaner energy sources.

Decreased Dependency On Crude Oil:

As part of its ongoing shift towards cleaner energy sources, China’s reliance on crude oil is expected to decrease. This is particularly evident in the transportation sector, where electric vehicles (EVs) and other alternative energy solutions are gaining momentum. As renewable energy sources like solar, wind, and natural gas increase in China’s energy mix, crude oil will play a diminishing role, leading to reduced dependency and potentially impacting global crude oil demand and prices.

This shift signals China’s efforts to align with global trends towards cleaner energy while managing its economic and energy needs more efficiently.

The pie chart highlights that China’s crude oil import reliance is expected to remain stable at around 70% during both the 2021-2025 and 2026-2030 periods. This indicates a steady dependence on foreign crude oil even as the country transitions towards alternative energy sources like natural gas and renewables.

                                  
Natural Gas Market Growth:

In contrast, China’s natural gas demand is forecast to grow robustly by 6.2% this year, setting a new record of 448.5 billion cubic meters. This growth is largely driven by China’s shift towards natural gas as a cleaner energy source for transportation, with a notable increase in natural gas-powered vehicles. By 2030, the share of new energy vehicles and heavy-duty trucks fuelled by natural gas is expected to grow significantly, reaching 30% and 15%, respectively. This shift is projected to reduce China’s reliance on gasoline and diesel by a significant margin, further elevating natural gas consumption.


These are the MCX chart and levels of crude oil and natural gas respectively.
Crude oil resistance 6958 –7052 and

Support zone is 5500

In Natural Gas Resistance is 368 and

Support zone is 303–297

The Relationship Between Crude Oil And Natural Gas:

China’s shift toward using natural gas as a cleaner energy source is expected to have a lasting effect on the global crude oil market. As China’s consumption of natural gas grows, especially in transportation, demand for traditional fuels like gasoline and diesel is likely to fall. This change in energy demand could cause crude oil prices to soften in the medium term, while natural gas prices might rise more sharply due to increasing demand.

As China diversifies its energy sources, crude oil and natural gas are likely to follow different paths in the MCX market. Crude oil’s growth is slowing down due to reduced consumption and changing economic factors, while natural gas is set to grow, driven by China’s push for greener energy solutions. Traders should keep a close eye on these diverging trends to take advantage of potential opportunities in both markets.

Until then, Happy Trading!

Commodity Samachar Securities
We Decode the Language of the Markets

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