China is sending a warning through the global oil market at exactly the moment Canada is trying to sell more crude into Asia. Sinopec’s research arm expects Chinese oil demand to fall by 600,000 barrels a day in 2026, or 8.9%, with gasoline and diesel leading the decline as high prices and electric-vehicle adoption reshape consumption. The forecast is especially notable because China remains the world’s largest oil importer and has become an increasingly important buyer of Canadian crude since the Trans Mountain expansion opened more Pacific export capacity.
For Canada, the message is not that Asian oil demand is disappearing. It is that the assumption of steadily rising Chinese consumption can no longer be taken for granted. That changes the conversation around export diversification, pipeline utilization, producer pricing and the long-term value of reaching overseas markets.
An 8.9% Drop Is More Than a Normal Slowdown
The scale of Sinopec’s forecast is what makes it stand out. Its Economics & Development Research Institute expects Chinese oil demand to decline by about 600,000 barrels a day in 2026, or 8.9% from the previous year. Reuters reported that this would mark a third consecutive annual decline. Sinopec also expects gasoline consumption to fall 8.7% to 149 million metric tons and diesel demand to drop 11.4% to 164 million tons. Jet fuel is the exception, with demand forecast to edge up 1.3% to 41.55 million tons.
Those numbers should still be treated as a forecast rather than a settled outcome. Oil-market expectations have moved sharply during 2026 as the Iran conflict, disrupted shipping, high fuel prices and weaker economic activity changed consumption patterns. Earlier in the year, the International Energy Agency had expected China to lead global oil-demand growth; by August, it was forecasting a 1.6-million-barrel-a-day contraction in global demand for 2026. The shift shows how quickly the market backdrop has changed.
EVs Have Become a Measurable Oil-Demand Force
Electric vehicles are no longer a small adjustment at the edge of China’s fuel market. The International Energy Agency estimates that EVs in China displaced around 1 million barrels a day of oil demand in 2025, roughly 15% of what road-transport oil consumption would have been if the fleet had remained entirely dependent on internal-combustion vehicles. That is already larger than the production of many oil-producing countries and big enough to influence refinery runs, import requirements and global pricing expectations.
The speed of adoption helps explain the effect. Electric cars captured more than half of all new-car sales in China in 2025 for the first time, while electric heavy-truck sales tripled to more than 200,000 units. The IEA expects electric cars to approach 60% of Chinese car sales in 2026. It also projects China’s EV fleet could displace about 2.7 million barrels a day of oil by 2030. Each new electric vehicle has a modest individual impact, but millions entering the fleet every year create a structural change that compounds over time.
Gasoline and Diesel Are Taking the First Hit
The composition of the decline matters because it shows where electrification and efficiency are hitting hardest. Sinopec’s 2026 forecast puts gasoline down 8.7% and diesel down 11.4%, while jet fuel still grows slightly. That split fits a broader pattern identified by the IEA: China’s road-fuel demand has been flattening as electric cars, buses and trucks take market share, even as aviation and petrochemical uses remain harder to replace. In 2025, the IEA said Chinese gasoline and diesel demand was virtually unchanged while aviation fuel use continued to rise.
Diesel may be especially important for Canada’s long-term read of the market. Electric heavy trucks are scaling quickly in China, and commercial fleets tend to accumulate far more kilometres than private cars. A delivery truck or tractor that switches from diesel to electricity can therefore remove much more fuel demand than a lightly driven passenger vehicle. At the same time, weaker construction and industrial activity can reduce diesel use independently of electrification. The 2026 decline is therefore a combination of technology, prices and economic conditions rather than a single-cause story.
China Can Weaken Demand Even While Oil Prices Stay High
A falling Chinese demand forecast does not guarantee cheap oil. In early September, Brent crude moved above US$100 a barrel as renewed fighting around Iran and disruptions to Middle Eastern exports tightened physical supply. Reuters reported that roughly 9 million barrels a day of crude and another 1 million barrels a day of refined products were still leaving the Middle East in recent days, compared with roughly 20 million barrels of crude and products before the war began. Supply shocks can overwhelm weak demand for long stretches.
China still matters because it can limit how far prices rise during those shocks. Reuters reported that Chinese seaborne crude shipments fell to about 7 million barrels a day in July and August from more than 11 million in February. Rystad Energy estimated that China accounted for more than half of third-quarter global demand destruction in petrochemicals and transport fuels. For Canadian producers, this creates an uncomfortable combination: geopolitical events can keep headline oil prices high, while weaker Chinese buying quietly reduces one of the market’s most important sources of demand growth.
Trans Mountain Made China More Important to Canada
China’s demand outlook carries more weight for Canada now because the country’s export geography has changed. The Trans Mountain expansion entered service in May 2024 and nearly tripled system capacity. The Canada Energy Regulator said Trans Mountain transported an average of 761,000 barrels a day in 2025, with utilization averaging 85%. The added capacity eased pipeline congestion and created a much larger route for western Canadian crude to reach the Westridge Marine Terminal in Burnaby and then move by tanker to overseas buyers.
China quickly became central to that new Pacific trade. Global Affairs Canada reported that Canadian crude-oil exports to China rose by C$4.0 billion in 2025, an increase of 165.1%, making China the largest destination for Trans Mountain crude within the Indo-Pacific region. Total Canadian merchandise exports to China rose 14.7% to C$34.4 billion that year, with crude accounting for most of the increase. A buyer that barely figured in Alberta’s export map before the expansion is now directly connected to the economics of Canada’s newest major oil-export corridor.
Diversification Reduced One Risk — and Created Another
For decades, Canada’s biggest crude-oil vulnerability was obvious: almost everything went south. Global Affairs Canada calculated that 97% of Canadian crude exports by value went to the United States over the 2015-to-2024 period. Trans Mountain changed that pattern. Statistics Canada said non-U.S. destinations accounted for 10.9% of Canadian crude exports in 2025, more than triple the 2.8% average share recorded from 2016 through 2024. Exports to countries other than the United States jumped 132.6% to 27.2 million cubic metres.
That is genuine diversification, but diversification works best when it spreads exposure across many buyers rather than simply replacing one dominant customer with another. China supplied much of the early demand for seaborne western Canadian heavy crude. In the seven months after the Trans Mountain expansion started in 2024, 59% of Alberta crude exported by sea went to China. If Chinese consumption is entering a durable decline, Canada’s Pacific strategy becomes less about gaining access to “Asia” in the abstract and more about developing a wider customer base across multiple Asian refining centres.
The Price Signal Matters as Much as the Volume Signal
The biggest Canadian consequence may arrive through price rather than through a visible collapse in export volumes. Global oil prices are set at the margin, so weaker demand from the world’s largest crude importer can pressure benchmarks even when Canadian barrels continue to move. Statistics Canada reported that the value of Canadian energy exports fell in 2025 largely because crude prices weakened, even as export volumes became more diversified. That is a reminder that selling every available barrel does not guarantee the same revenue if the global clearing price falls.
Trans Mountain has already shown why access to more buyers can protect producer economics. Global Affairs Canada found that Alberta heavy crude shipped by sea to non-U.S. markets averaged C$94.96 a barrel during the final seven months of 2024, slightly above the C$93.81 received for heavy crude shipped by pipeline to the United States over the same period. The difference was modest, but the strategic value was larger: competing destinations can improve bargaining power. If China becomes a less aggressive buyer, preserving that advantage will depend on keeping other refiners interested enough to compete for Canadian barrels.
Canadian Production Is Still Growing
The Chinese forecast arrives while Canadian supply is moving in the opposite direction. Statistics Canada said crude oil and equivalent production reached a record 310.9 million cubic metres in 2025, up 4.0% from 2024. The upward trend continued into 2026: June production rose 3.1% from a year earlier to 25.6 million cubic metres, marking a thirteenth consecutive month of year-over-year gains. Exports outside the United States also increased sharply that month, with most of those barrels leaving through Burnaby.
The Canada Energy Regulator’s 2026 baseline scenario assumes production rises from 5.5 million barrels a day in 2024 to about 5.8 million by 2030. Its scenarios make clear, however, that global oil prices are a decisive variable. Under a lower-price case, production growth is weaker and output eventually declines; under a higher-price case, production expands much more. That makes China’s demand trajectory relevant well beyond individual tanker cargoes. A structurally softer global market could influence the economics of future oil-sands expansions, conventional drilling and pipeline optimization across western Canada.
Heavy Crude and Petrochemicals Could Cushion the Blow
A decline in Chinese transport-fuel demand does not mean every type of crude faces the same outlook. Canadian western barrels are heavily weighted toward heavy crude, and some Chinese refiners are configured to process heavier feedstocks into fuels and petrochemical products. Trans Mountain chief executive Mark Maki told Reuters that heavy Canadian oil is an attractive petrochemical feedstock for Chinese buyers. That matters because petrochemicals, aviation and other non-road uses are expected to remain more resilient than gasoline consumption as vehicle electrification advances.
There are limits to that cushion. Sinopec’s research arm expects China’s refining capacity to reach 952 million tons a year in 2026 but then shrink as inefficient plants close, potentially falling to roughly 900 million to 910 million tons by 2030. It also expects 80 million to 100 million tons of smaller and medium-sized capacity to leave the market. The IEA similarly expects petrochemicals and aviation to support oil demand longer than road transport, but not necessarily enough to restore the rapid Chinese demand growth of the past. Canadian heavy crude may retain a valuable niche without being insulated from the broader slowdown.
Canada’s Energy Strategy Now Needs a Broader Asian Map
The strongest lesson for Canada is not to retreat from export diversification, but to make it more diversified. Trans Mountain remains a valuable strategic asset because it gives producers access to buyers that were previously difficult to reach. The CER says the system averaged 892,000 barrels a day of available capacity in 2025, and proposed optimization projects could eventually raise capacity to roughly 1.19 million barrels a day. More capacity increases optionality, but it also increases the importance of having enough competitive buyers on the other side of the Pacific.
That means China can no longer be treated as a guaranteed growth engine. Japan, South Korea, India, Singapore and emerging Southeast Asian refiners become more important if Chinese demand continues to soften. Trans Mountain’s chief executive has already pointed to countries such as Thailand and Vietnam as potential growth customers. Canada’s broader trade data show that non-U.S. exports are reaching record levels, so the diversification effort is real. The 8.9% Sinopec forecast is a warning that market access alone is not the finish line; long-term resilience depends on customer diversity, competitive costs and the ability to sell into a world where oil demand growth is becoming harder to find.
