Energy - China (H/A): Lower China Oil & Gas demand forecast; coal and oil 2Q26 earnings preview

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Energy - China (H/A): Lower China Oil & Gas demand forecast; coal and oil 2Q26 earnings preview

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Energy - China (H/A)

Lower China Oil & Gas demand forecast;

coal and oil 2Q26 earnings preview

Rating Change

Oil & gas: lower 2026E demand on gradual import rebound 08 July 2026

China has emerged as a key swing oil consumer. Customs data show that crude imports Equity

fell 29% YoY to 7.8mbd in May. As flows through Hormuz gradually normalize, we expect China

China to increase crude imports gradually rather than rush back to pre-war levels due to Energy

1) ample crude inventories, 2) lower refinery utilization on sluggish domestic demand, Matty Zhao >>

and 3) ongoing logistics bottlenecks. We lower our 2026 crude demand forecast to Research Analyst

15mbd (-5% YoY) and net import forecast to 10.6mbd (-8% YoY). Elevated costs and Merrill+852 3508Lynch4001(Hong Kong)

weak profitability among large industrial users have slowed gas penetration. We lower matty.zhao@bofa.com

our 2026 gas demand growth forecast to 1% YoY, with demand recovery deferred to Yiming Wang >>

Research Analyst

2027. We cut PetroChina’s FY26E/27E earnings by 8% to reflect our latest 2H26 and Merrill Lynch (Hong Kong)

FY27 Brent oil price assumption of US$77/b and US$70/b, respectively. +852 3508 5037

yiming.wang@bofa.com

Refining & chemicals: margin pressure and weak demand

Brent prices have dropped to pre-war levels, leading to potential inventory losses. Our

tracking indicates China’s GRM plummeted to negative USD0.2/bbl in June. Despite Exhibit 1: PO changes

Beijing issuing the second batch of export quotas – and the existence of export arbitrage We upgrade SEG to Buy

– we do not expect exports to rebound meaningfully in the near term. Further, rising