Prolonged Trade War May Wipe Out 50% Of China's Oil Demand Growth
The wider oil market sentiment continues to be bearish given the possibility of a global trade war, potential recessionary headwinds in major demand centers and higher crude production. But the first of these three factors could have an outsized impact on China, according to one market analysis outfit.
In a note to clients on Monday, Rystad Energy said a prolonged trade war carries the potential of wiping out half of China's oil demand growth. Were such a scenario to materialize, the slump in global oil prices will likely be inescapably huge.
Should downside risks to the country's outlook materialize, Rystad's analysis points to China's projected 2025 oil demand growth of 180,000 barrels per day falling by 50%,
'The ongoing trade war has upended markets' global economic outlook, hitting commodity prices and changing the oil demand outlook. The uncertainties of U.S. President Donald Trump's tariff policies disrupted the markets' original trajectory and posed concerns over the macro economy and demand outlooks,' Rystad told clients.
Before Trump Tariffs introduced a seismic shock to the global economy, China's Q1 2025 GDP growth beat expectations at 5.4%, together with other macroeconomic indicators showing growing signals such as exports, the Purchasing Managers' Index and retail sales.
'Strong economic growth in Q1 was also based on last September's stimulus taking effect gradually,' Rystad observed. 'But assuming trade relations between China and the U.S. remain disrupted, we expect a mild scenario is very likely for this year, with China's GDP growth slowing down by one percentage point.'
The impact of slower GDP growth on Chinese oil demand growth would be a deceleration of 0.47 of a percentage point, as the economy is still relatively industry- and export-driven, it added.
'With the country set to announce more stimulus in the face of the trade war, we expect some upside potential to offset the negative impact from the trade war and mitigate the oil demand growth loss. Overall, the current estimate indicates a loss of 90,000 bpd growth in oil demand from 180,000 bpd levels.'
The research outfit reckons the biggest loss will likely be in diesel and biggest gain in naphtha which may offset 'some' demand loss.
Unsurprisingly, petrochemical and diesel demand will bear 'the most downside pressure because of the trade war', as consumer spending and industry prosperity and industry-related transportation will be 'damaged' by potential trade decline.
The country's domestic petrochemical feedstock demand could be supported by less dependence on imports amid the elevated tariffs.
'Liquefied petroleum gas demand growth will slow down with a shift towards naphtha demand upside as a potential utilization rate increase of steam crackers will offset the loss from propane dehydrogenation [or 'PDH'] as propane relies on external supply.'
But around 100,000 bpd of propane demand will be at risk if the trade war sustains and PDH operators are unable to pivot, with the U.S. dominating supply, Rystad added.
Domestic gasoline and jet fuel demand, strongly associated with personal and business mobility, will not be negatively impacted in a mild trade war scenario.
'There could, however, be some restructuring between international and domestic travel and potentially a changed average distance of travel, while some upside potential exists as lower prices are likely to boost consumption,' Rystad concluded.
Overall, however short or long a trade war may turn out to be, higher production and lower demand growth implies the crude market may continue to remain rocky for some time yet.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
USA Today
2 minutes ago
- USA Today
Trump's latest legal victory
Hi! Rebecca Morin here. Breaking: President Donald Trump said he plans to join law enforcement on the streets of Washington D.C. on Thursday night amid his federal takeover of the city. Trump's civil fraud court loss thrown out President Donald Trump just got another personal legal victory. The $454 million penalty imposed against Trump in his New York civil fraud case has been thrown out by an appeals court. In a Thursday ruling, the five-judge Manhattan-based appeals court determined the penalty was improper. Some members of the panel said that the penalty violated the U.S. Constitution's prohibition on excessive fines. Others said Trump should get a new trial due to errors in the trial judge's determinations. Why was Trump facing a penalty? Trump and some of his entities were hit with that hefty penalty, plus interest, in February 2024, after New York trial Judge Arthur Engoron concluded that Trump had inflated the value of his assets for years to get better loan and insurance terms. Engoron also imposed about $10 million in separate penalties against Trump's eldest sons, Eric and Don Jr., and former Trump Organization executive Allen Weisselberg. Why Trump claimed 'TOTAL VICTORY' after the appeals court decision. A look at Trump's holdings: Trump has bought more than $100 million in company, state and municipal bonds since taking office in January, according to government disclosures about the billionaire's holdings posted online Tuesday. Trump and his family have no involvement in directing or influencing what to buy or sell, which are decisions made by a third-party investment manager, according to a White House source familiar with the report. The Office of Government Ethics certified the report in compliance with legal requirements, the source said. See which bonds the president bought. A politics pit stop A new Texas voting map It could be as early as Thursday when Texas Republicans fully pass a new state congressional map intended to flip five Democratic-held U.S. House seats up for grabs in the 2026 elections. Republican legislators in the state House passed the map in an 88-52 vote on Wednesday. Earlier this month, dozens of Democratic lawmakers ended a two-week walkout, temporarily delaying the bill's passage. The map will now go to the Senate, where it is set to pass, and then head to Republican Gov. Greg Abbott's desk. Texas undertook a rare mid-decade redistricting to help Trump improve their party's odds of holding a narrow U.S. House majority amid political turmoil. How the new map will set off a 'redistricting arms race.' A pause on White House tours If you were coming to Washington in the fall and hoping to get a tour of the White House, you're out of luck. The White House has suspended popular public tours of the historic building starting Sept. 1 during Trump's planned construction of a new ballroom. The White House hasn't announced how long the hiatus in tours will last. But lawmakers who arrange tours for their constituents – subject to White House approval – are warning that none are expected for the indefinite future. What to know about Trump's ballroom project. Got a burning question, or comment, for On Politics? You can submit them here or send me an email at rdmorin@
Miami Herald
2 minutes ago
- Miami Herald
Weekly unemployment rises to highest level since May; nearly 2M jobless
Aug. 21 (UPI) -- New unemployment claims climbed by 11,000 for the week ending Aug. 16 over the week before bringing the number of new claims to 235,000, according to the U.S. Department of Labor. The advance seasonally adjusted insured unemployment rate was 1.3% for the week ending Aug. 9, unchanged from the previous week's unrevised rate, a press release said. The advance number for seasonally adjusted insured unemployment during the week ending Aug. 9 was 1.97 million, an increase of 30,000 from the previous week's revised level. It's the highest level for insured unemployment since Nov. 6, 2021, when it was 2.04 million. The United States only added 72,000 jobs in July, well below the forecast amount of 115,000. Revisions to the May and June figures cut 258,000 jobs off estimates, and the unemployment rate rose to 4.2% from 4.1%. As a result, President Donald Trump fired Bureau of Labor Statistics Commissioner Erika McEntarfer, claiming she manipulated the BLS numbers to make him look bad. The BLS does not contribute to the weekly unemployment benefits report except to calculate the annual seasonal adjustments. Some major companies have announced layoffs this year, including Spirit Airlines, Southwest Airlines, Chevron, Starbucks, Meta, Stellantis, Disney, Procter & Gamble, Paramount, Microsoft, Scale AI and more. Many blamed the implementation of Trump's tariffs. The advance number of actual initial claims under state programs, unadjusted, totaled 194,920 in the week ending Aug. 16, a decrease of 4,470, or -2.2%, from the previous week. The seasonal factors had expected a decrease of 13,875 (or -7%) from the previous week. There were 192,463 initial claims in the comparable week in 2024. The total number of continued weeks claimed for benefits in all programs for the week ending Aug. 2 was 2 million, a decrease of 26,321 from the previous week. There were 1.9 million weekly claims for benefits in all programs in the comparable week in 2024. No state was triggered to initiate the Extended Benefits program during the week ending Aug. 2. Initial claims for UI benefits filed by former Federal civilian employees totaled 635 in the week ending Aug. 9, a decrease of 2 from the previous week. There were 8,237 continued weeks claimed filed by former Federal civilian employees the week ending Aug. 2, an increase of 44 from the previous week. There were 462 initial claims filed by newly discharged veterans, an increase of 23 from the preceding week. Newly discharged veterans claiming benefits totaled 6,416, an increase of 1,798 from the prior week. The highest insured unemployment rates in the week ending Aug. 2 were in New Jersey (2.7%), Puerto Rico (2.6%), Rhode Island (2.5%), Minnesota (2.2%), California (2.1%), District of Columbia (2.1%). The largest increases in initial claims for the week ending Aug. 9 were in California (+741), New York (+630), Rhode Island (+570), Michigan (+527), and Maryland (+343). The largest decreases were in Iowa (-704), Illinois (-334), New Jersey (-251), Pennsylvania (-158), and Oregon (-153). Copyright 2025 UPI News Corporation. All Rights Reserved.
Forbes
3 minutes ago
- Forbes
China Softens Stance: What A Yuan-Backed Stablecoin Could Mean
For years, Beijing's position on digital assets seemed resolute: cryptocurrencies were a threat to financial stability, a distraction from carefully managed capital controls, and a vehicle for speculation and fraud. When China banned crypto mining and trading in 2021, it looked like the end of any serious domestic experiment with blockchain-based money. Yet in a striking reversal, Chinese policymakers are now quietly preparing to consider yuan-backed stablecoins as a tool to strengthen the renminbi's role in the global economy. What was once prohibited may soon be actively promoted, but under strict guardrails. Reports indicate that the State Council is reviewing a roadmap for stablecoins pegged to the yuan, with Hong Kong and Shanghai tipped as pilot zones for rollout. Senior leadership is expected to convene in the coming weeks to clarify who will issue them, what regulations will govern their use, and how risks like capital outflows or illicit finance will be contained. For an economy still deeply cautious about capital flight, the idea of authorizing even state-linked stablecoins marks a profound recalibration. The shift reflects a convergence of pressures: the growing dominance of dollar-pegged stablecoins in cross-border trade, lobbying from Chinese tech giants eager to issue offshore digital yuan tokens, and the realization that without innovation, China risks ceding digital finance leadership to the U.S. and its allies. In other words, stablecoins are no longer just a speculative fringe product. they have become a geopolitical tool. From Prohibition to Pragmatism China's 2021 ban was sweeping. The government targeted everything from Bitcoin mining operations in Inner Mongolia to offshore exchanges serving domestic investors. The rationale was straightforward: crypto was volatile, energy-hungry, and capable of undermining state authority over money. But the world has changed in four short years. Stablecoins have moved from crypto curiosity to mainstream financial infrastructure, powering billions of dollars in daily settlement and serving as working capital for exporters in markets with scarce access to dollars. For Chinese merchants, the rise of dollar-linked stablecoins has been particularly compelling. Exporters paid in USDT or USDC can bypass some banking friction and settle faster with overseas buyers. That reality has alarmed Beijing, which fears an even greater US dollar entrenchment in global digital commerce. The answer for policymakers may be to create tightly regulated yuan-backed stablecoins as a counterweight. The logic is compelling. A digital asset denominated in renminbi could be efficient instrument for Belt and Road transactions, for trade with African and Southeast Asian partners, and for Chinese technology platforms that increasingly straddle global markets. It would also work with the existing e-CNY. The Role of Hong Kong and Shanghai The geography of China's stablecoin experiment is telling. Hong Kong has already implemented a Stablecoin Ordinance, requiring issuers to be licensed and subjecting them to strict oversight of reserves and redemption rights. The city has positioned itself as the experimental laboratory for digital finance within a 'one country, two systems' framework, where more liberal regulatory sandboxes are possible. Shanghai, meanwhile, is being readied as the mainland's operations hub. The city has always had ambitions to be a global financial center on par with New York and London, and an internationalized stablecoin market would fit neatly into that vision. By situating stablecoin pilots in these two hubs, China can cautiously test global use cases while keeping its capital account firewall intact. Global Currency Ambitions The strategic aim here is clear: to internationalize the yuan in digital form. Today, the renminbi accounts for just under 3% of global payments; the U.S. dollar constitutes just under half. A yuan-backed stablecoin could create a parallel channel for cross-border settlement, one that bypasses SWIFT and U.S. correspondent banks. If successful, the impact could be big. For decades, U.S. dollar dominance has rested on economic strength and the infrastructure of payments and settlement. Stablecoins erode some of that infrastructure advantage. For China, introducing a yuan stablecoin would provide a credible alternative currency in strategic corridors, particularly in Asia, Africa, and parts of Latin America, where Chinese trade and investment already loom large. The Belt and Road Initiative is the obvious proving ground, as many of the primarily infrastructure-related projects funded by Chinese banks already involve yuan lending and repayment. A stablecoin denominated in renminbi would streamline these flows, reduce reliance on third-party currencies, and perhaps even lock partners more firmly into the Chinese financial orbit. Balancing Innovation and Control Still, Beijing's caution is visible. Policymakers remain deeply concerned about capital flight and money laundering. One reason the e-CNY was built as a centralized, state-controlled system was to ensure full traceability. Some stablecoins, even if issued by licensed banks or tech platforms, would inevitably operate on distributed systems. That raises questions about how to allow programmability and flexibility without undermining the PBOC's grip on the capital account. Reports suggest that only a handful of state-linked institutions, possibly the major state banks, will be initially authorized to issue yuan stablecoins. Redemption may be tightly geofenced, limited initially to B2B trade settlement rather than retail use. The PBOC is expected to impose real-time reporting obligations, reserve requirements, and redemption caps to prevent destabilizing flows. That balance will define the success of the project. Too much control, and the stablecoins will be clunky, unattractive, and irrelevant. Too little, and they risk fueling exactly the kind of capital flight Beijing fears. Implications for Fintech and Global Markets For fintech firms, the opening of yuan-backed stablecoin markets could be transformative. Custody providers, compliance technology firms, and payment processors will all find new opportunities to support the infrastructure of issuance and redemption. Chinese tech giants such as and Ant Group, which have reportedly lobbied for offshore stablecoins, may be essential levers in building consumer and merchant-facing applications. For emerging markets, the implications could be even larger. Platforms in Africa or Southeast Asia could integrate yuan stablecoins as settlement tools, reducing dependence on dollars and smoothing trade with Chinese suppliers. In places where dollar liquidity is limited, having a yuan alternative could reshape regional FX dynamics. Global investors, too, will be watching closely. If yuan-backed stablecoins gain traction, they could enable new asset classes and ETFs tied to Chinese digital currency infrastructure. They may also challenge the valuation of dollar-linked stablecoins, forcing issuers like Circle and Tether to rethink their positioning in Asian markets. Risks on the Horizon Of course, risks abound. International backlash is possible. Washington may view yuan stablecoins as a direct attempt to erode dollar hegemony, potentially prompting sanctions or controls on their use in U.S.-linked systems. Capital flight remains another concern: even carefully geofenced systems can be gamed, and sophisticated users could find ways to move yuan offshore without authorization. Domestically, the coexistence of e-CNY and stablecoins may create confusion or competition. The government has been pushing adoption of the e-CNY for years, but uptake has been uneven. If consumers or businesses perceive stablecoins as more practical, the state may face the awkward task of promoting one digital form of the yuan while restraining another. Finally, there is a risk of over-engineering. If regulatory requirements make yuan stablecoins cumbersome in the form of slow settlement, strict redemption limits, limited interoperability, then their adoption will likely be limited and the experiment will fizzle. A Quiet Paradigm Shift Even with these risks, China's willingness to consider yuan-backed stablecoins signals something important: a recognition that the future of money is digital, borderless, and programmable. While Beijing once hoped that the e-CNY alone would suffice, it now appears to understand that competing in the global arena will require a new, more flexible approach. Stablecoins are not about to dethrone the dollar overnight. But they could chip away at its dominance at the edges, especially in regions where China has strategic influence. For fintechs, they open new commercial opportunities. For policymakers, they introduce new regulatory challenges. And for the global financial system, they signal a future where digital money is not an experiment but a battleground of economic strategy. In that sense, the yuan-backed stablecoin debate is about more than technology. It is about whether China can use digital finance to accelerate its long-running project of currency internationalization. The coming months, as pilots are announced and regulations clarified, will show whether this is a cautious trial balloon or the start of a genuine re-engineering of the global monetary system.
