Investing.com -- Goldman Sachs said the drop in China's oil demand from the petrochemicals sector appears less sustainable than weakness in gasoline and diesel consumption, with nearly one-third of the second quarter decline already reversing by August.

The bank noted that while gasoline and diesel demand is likely to stay low as long as China product prices remain elevated, the petrochemicals sector faces different dynamics. Goldman Sachs estimates that feedstock switching contributed only modestly to the weakness in China's petrochemical oil demand.

Using plant-level capacity and utilization data, the bank calculated that oil-to-coal switching accounts for just 19% of the second quarter impact on China's petrochemical oil demand, while naphtha-to-ethane switching explains only 8%.

The majority of the decline, at 73%, resulted from lower production of petrochemical products. Goldman Sachs said this likely reflected downstream destocking, which is not sustainable long-term, and possibly some price-induced demand reduction.

The decline in China's oil end-use demand has reduced the global oil deficit and eased upward crude price pressure following the Hormuz shock, according to the bank. Fuel switching, including increased electric vehicle usage, has driven much of the weakness in China's gasoline and diesel consumption.