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2 Energy Picks for Our Bearish View on Chinese Oil Demand

Electric vehicle adoption and a shift toward natural gas in China will help boost Cheniere Energy and Royal Dutch Shell.

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Preston Caldwell: We have recently updated our outlook on China oil and gas demand. In short, we're above consensus on China's medium-term oil and gas demand. However, our oil forecasts shift to being bearish in the long-term looking out to 2040, owing to our differentiated view on EV (electronic vehicle) adoption.

In terms of implications, we're maintaining our midcycle oil price of $55/bbl WTI, and therefore impact for oil stocks is negligible. On the other hand, our above-consensus view on China's natural gas consumption drives a bullish view on LNG (liquefied natural gas) imports. This has a significant impact on the global LNG market and boosts our already bullish view on LNG-levered names Cheniere and Shell among others.

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Preston Caldwell does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.