BackIndia’s August oil demand up by 2.5%, 2023 growth revised lower to 239,000/bbl: S&P Global
On a year-on-year basis, the oil demand was up by 270,000 barrels per day, or 6 per cent, over strong economic fundamentals.
PremiumIndia's oil products demand increased by 118,000 barrels per day on a month on month (MoM) basis in August as below-average rainfall and uneven distribution led to strong factory activity and increased mobility, according to a report by S&P Global Commodity Insights.
Liquified petroleum gas (LPG), naphtha and other minor products saw month on month growth of 3 per cent, 5 per cent and 13 per cent, respectively. On a year-on-year basis, the oil demand was up by 270,000 barrels per day, or 6 per cent, over strong economic fundamentals.
Weaker-than-expected monsoon rains led to a drop in diesel sales last month as sowing activities were hampered. Summer rains are crucial given that nearly half of India's farmland lacks irrigation and this lengthy dry spell has led to extremely low soil moisture, which could inhibit growth of crops, according to S&P Global.
India produced a total of 2.50 million metric tonnes (MMT) of crude oil in July 2023 - registering a growth of 2.1 per cent compared to the year-ago period, according to Petroleum Planning & Analysis Cell (PPAC). Out of 2.5 MMT, Oil and Natural Gas Corporation (ONGC) produced 1.62 MMT of crude oil while Oil India Limited (OIL) and private sector producers contributed 0.28 MMT and 0.60 MMT, data released by the Oil Ministry showed.
Petrol, diesel demand outlook
PPAC data shows that diesel demand dropped by 3 per cent on the month, although it was 5 per cent above the same month last year and 9 per cent above August 2019, according to S&P Global.
‘’It is important to note that diesel demand remained strong from the mobility sector, as evidenced by data for E-way bills generation and daily average highway toll transactions. The reduction in demand mainly came from the agriculture sector where a contraction in sales of tractors has led to lower diesel consumption,'' said Himi Srivastava, Senior Analyst, South Asia Oil Markets, S&P Global Commodity Insights.
The diesel demand is expected to be close to 7 per cent above pre-COVID-19 levels this year, as per the global ratings company. Petrol demand increased to 851,000 barrels per day in August, with the lower rainfall helping to keep mobility demand strong. Higher temperatures also likely led to higher usage of in-car air conditioning, increasing petrol consumption.
‘’Gain in sales of petrol has also been on account of private fuel retailers whose market share increased on month by 2.5 per cent. India’s petrol demand rebounded to above pre-COVID levels in 2021 and is expected to be some 23 per cent higher than 2019’s level in 2023," added Srivastava.
India's oil demand revised lower to 293,000/bbl
‘’Overall, India's oil demand is now expected to grow by 239,000 barrels per day in 2023, a downward revision of 3,000 barrels per day from our last update,'' said S&P Global.
Middle distillates, gasoil, and kerosene/jet fuel combined will account for more than 50 per cent of the growth, with gasoline and naphtha together contributing 30 per cent to the rise. Oil demand is holding up well and should continue rising, supported by solid economic growth with more focus on industrial and construction activity.
However, the July-September quarter is expected to see a seasonal dip due to the monsoon. Demand is expected to pick up again in the October-December quarter with the onset of festivities in India. India’s oil demand in 2023 is expected to be 7 per cent above 2019, and about 11 per cent above in 2024, according to S&P Global Commdity Insights.
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