Demand for oil slows as floods impact trade

Demand for oil slows as floods impact trade
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First Published: Tue, Sep 30 2008. 10 59 PM IST
Updated: Tue, Sep 30 2008. 10 59 PM IST
New Delhi: Annual growth in the country’s domestic oil products sales slowed to 3.6% in August as heavy floods in some states cut industrial activity and fuel demand, government data showed on Tuesday.
Annual fuel sales had soared 7.8% in July, rebounding from being almost flat in June, when dealers reduced inventories built ahead of the 10% increase in fuel prices in the first week of the month.
“Because of floods in Bihar, eastern Uttar Pradesh and excess rains in Punjab, overall construction and industrial activity was affected. This resulted in less sales,” said an oil ministry official, who did not wish be named.
Despite the slowdown, total sales of refined products, a proxy for demand, rose from a year ago to 9.95 million tonnes, or mt, as fuel consumption continued to expand despite crude oil prices hovering around $100 a barrel.
In August, diesel sales, which account for one-third of total sales, rose 9.4% from a year ago to 3.63mt.
Oil minister Murli Deora said in a statement the government faced losses of about Rs1 trillion for this fiscal year from sales of diesel at government-fixed and heavily subsidized rates. Deora added that firms were increasingly seeking to overcome massive power shortages by turning to diesel-run generators, adding to the government’s subsidy bill.
Power firms have also been switching to cheaper diesel in place of fuel oil, triggering calls for a dual pricing system for large consumers of the fuel.
Diesel sales by state firms had risen more than 15% in April-July from a year ago, forcing imports to be stepped up to meet demand. But slower growth in domestic sales helped cut diesel imports by 90% to 34,700 tonnes.
Rising consumption in economies such as China, where apparent demand grew a strong 7% in August, and India have helped support crude oil prices above $100 a barrel (Rs4,690) despite weak demand in the US, the world’s top consumer, and other developed nations.
The International Energy Agency in its latest report kept its outlook for Indian demand unchanged from its last report at 3.1 million barrels per day (bpd) in 2008, a growth of 4.9% on year, and 3.2 million bpd in 2009.
Petrol sales rose 8% to nearly 892,100 tonnes in August while naphtha sales grew to 6.4% to Rs10.9 lakh.
Crude oil imports rose 10.3% from a year earlier to 10.88mt, mainly due to higher overseas purchases by Essar Oil Ltd and Reliance Industries Ltd.
Import of oil products declined an annual 25.2% in August to 1.45mt as state refiners stepped up buying from Essar to meet local demand. Petrol imports rose 63.2% to 31,500 tonnes, while those of refined diesel dived to 34,700 tonnes. Export of oil products continued to register negative growth because of high local demand.
Asia’s third largest oil consumer shipped out 5.8% less in August at 3.06mt. Naphtha exports declined by 18% on high local demand.
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First Published: Tue, Sep 30 2008. 10 59 PM IST
More Topics: Oil | Flood | August | Sales | Bihar |