China's growing importance to the global oil market

The primary driver of global crude oil demand has shifted from developed economies to emerging markets. In 2023, non-OECD countries accounted for 55% of global crude oil demand; meanwhile, as our chart of global consumption shows, demand growth in developed countries has remained relatively stable.

This set of charts examines Chinese oil consumption and inventories from multiple angles, including higher-frequency data sources that can be used to build predictive, fast-reacting models for commodity traders.

As proxy for Chinese oil demand, our second chart considers airlines. Air traffic was closely correlated with national oil consumption, growing in tandem until the pandemic -- when most flights were grounded for years, jet fuel demand tumbled and national oil consumption flat-lined. Flights have returned to pre-pandemic norms, but oil consumption has yet to return to the previous growth trend.

(It's worth noting that we calculated "apparent consumption," which allows us to get a monthly estimate using a formula based on production, imports, exports and inventory changes; official consumption figures are released only annually.)

Turning to refineries, we track weekly figures for processed crude oil as well as the capacity utilization rate -- a key indicator for analyzing the supply-demand balance in the crude oil market. Rising utilization rates often signal increased crude oil demand and provide upward pressure on prices.

Changes in crude oil inventories at Chinas' ports also play a significant role in shaping the supply-demand structure of the energy market, influencing price trends and creating arbitrage opportunities. High inventory levels often suppress near-month futures prices, while low inventory levels may lead to contango corrections or backwardation expansions. We also track Shanghai Futures Exchange crude oil warrant inventory levels, which show a comparable relationship with price spreads.