China's Commodity Demand Shifts and OPEC+ Policies: Strategic Insights for Long-Term Investors

The Dual Forces Reshaping Commodity Markets

For long-term investors in energy and materials sectors, the interplay between China's evolving commodity demand and OPEC+ policy consistency represents a critical axis of strategic positioning. As global markets grapple with decarbonization, overcapacity, and geopolitical volatility, understanding these dynamics is essential for navigating risks and opportunities.

China's Energy Transition: A Structural Shift

China's energy demand is undergoing a profound transformation. According to the LEAP-CHINA model, total energy demand is projected to peak in 2049, with non-fossil energy power generation reaching 78–82% by 2060, as described in the S&P Global Commodities 2025 analysis. This shift is already evident in the oil sector, where new energy vehicles (NEVs) and LNG trucks are displacing gasoline and diesel consumption. In 2024, NEVs alone reduced gasoline demand by 28 million tonnes (3.1%), while LNG trucks cut diesel use by 25 million tonnes (4.8%), according to the Dialogue analysis. By 2025, these trends are expected to further suppress demand by 2.4% and 5.5%, respectively, per the Dialogue analysis.

China's oil demand is now projected to peak at 770 million tonnes in 2025, followed by a gradual decline to 240 million tonnes by 2060, according to the Dialogue analysis. This structural slowdown is driven by the rapid adoption of NEVs (38.6% of new car sales in early 2024), high-speed rail, and LNG alternatives, as noted by S&P Global. While petrochemical feedstock demand will offset some fuel declines, the overall trajectory signals a reduced role for China as a primary driver of global oil demand. For investors, this underscores the need to prioritize renewable energy infrastructure and battery technologies over traditional hydrocarbon assets.

Materials Sector Overcapacity: A Global Challenge

China's materials sector is grappling with overcapacity across steel, chemicals, and metals, creating ripple effects in global commodity markets. In 2025, the government announced plans to reduce crude steel output and curtail new capacity, responding to domestic overproduction and weak demand, as outlined in the S&P Global Commodities 2025 analysis. Steel output fell by 3.1% in the first seven months of 2025, while copper smelting fees and polysilicon prices signaled eroding profitability, according to Bloomberg's Five Pointers.

The chemicals industry faces even starker imbalances, with overcapacity reaching 93% in segments like epichlorohydrin and siloxanes, according to the IEA China report. This has enabled China to dominate global markets but at the cost of triggering protectionist responses and eroding margins. For investors, the key lies in identifying firms adapting to efficiency-driven policies, such as those retrofitting aging facilities or pivoting to specialty chemicals, as Bloomberg outlines.

OPEC+ Policy Adjustments: A Fragile Balancing Act

OPEC+ has sought to stabilize oil markets through phased production adjustments, but its influence is waning. In 2024–2025, the group unwound 2.2 million barrels per day of voluntary cuts, with further increases planned, as documented in the S&P Global Commodities 2025 analysis. However, non-OPEC+ supply growth-particularly from U.S. shale and offshore projects in Brazil and Guyana-has limited OPEC+'s ability to control prices, according to the IEA China report.

Internal discipline remains a challenge, with some members exceeding production quotas despite efforts by Saudi Arabia and Russia to enforce compliance, S&P Global notes. Geopolitical factors, such as the potential return of U.S. sanctions on Iran and Venezuela, further complicate OPEC+'s strategy, as S&P Global observes. For investors, the group's ability to balance market share with price stability will hinge on its capacity to adapt to external shocks and the energy transition.

Strategic Positioning for Investors

The interplay between China's demand shifts and OPEC+'s policy adjustments creates both risks and opportunities. For energy investors, the decline in oil demand and rise of renewables suggest a long-term tilt toward solar, wind, and battery technologies. China's clean energy investments-surpassing $625 billion in 2024-highlight this trend, according to the IEA.

In materials sectors, investors should focus on companies addressing overcapacity through innovation and efficiency. China's push for advanced materials in AI, semiconductors, and renewables offers potential, as Bloomberg outlines. Meanwhile, OPEC+'s policy flexibility-such as its ability to pause or reverse production adjustments-provides a buffer against short-term volatility but remains uncertain in the long term, S&P Global suggests.

Conclusion

China's decarbonization and OPEC+'s policy adjustments are reshaping global commodity markets. For long-term investors, the key is to align portfolios with structural trends-such as renewable energy adoption and materials sector efficiency-while hedging against short-term volatility. As the energy transition accelerates and overcapacity challenges persist, strategic positioning will require a nuanced understanding of both demand-side shifts and supply-side policy dynamics.