India’s August oil demand soars 2.5%, 2023 growth outlook adjusted to 239,000 b/d: S&P Global, ET EnergyWorld
New Delhi: India’s oil products demand surged by 118,000 barrels per day (b/d) in August, registering a month-on-month growth of 2.5%, according to a recent report by S&P Global Commodity Insights. This remarkable uptick in demand was attributed to erratic rainfall patterns across the nation, which bolstered factory activity and facilitated increased mobility.
Notable growth was observed in Liquefied Petroleum Gas (LPG), naphtha, and other minor products, with month-on-month increments of 3%, 5%, and a substantial 13%, respectively. On a year-on-year basis, India’s oil demand displayed a rise of 270,000 b/d, marking a noteworthy 6% increase, driven by the country’s robust economic fundamentals.
Himi Srivastava, Senior Analyst of South Asia Oil Markets at S&P Global Commodity Insights, weighed in on the situation, pointing out the impact of unfavorable monsoon rains on diesel sales. She stated, “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.”
Despite the monthly 3% drop in diesel demand, it remained 5% higher than the same month last year and a substantial 9% above August 2019 levels. Diesel consumption remained robust in the mobility sector, as indicated by data on E-way bills generation and daily average highway toll transactions.
The decline in demand primarily stemmed from the agricultural sector, where reduced sales of tractors led to lower diesel consumption. Gasoil demand is expected to maintain its resilience, hovering close to 7% above pre-COVID-19 levels this year.
Srivastava also noted that gasoline demand soared to 851,000 b/d in August, benefitting from reduced rainfall and higher temperatures, which contributed to sustained mobility demand. She added, “Higher temperatures also likely led to higher usage of in-car air conditioning, thereby increasing gasoline consumption. Further, gain in sales of gasoline has also been on account of private fuel retailers whose market share increased on month by 2.5%. India’s gasoline demand rebounded to above pre-COVID levels in 2021 and is expected to be some 23% higher than 2019’s level in 2023.”
Jet fuel and kerosene demand climbed to 188,000 b/d, marking a 2.4% increase from July. This growth was driven by summer travel and the presence of two long weekends during the month. Data from AirNav Radar Box indicated that domestic flights in August remained at a similar level to July but saw a substantial 9% year-on-year growth.
International travel maintained relative stability on a monthly basis, with an even more impressive year-on-year growth rate of 17%. While flight departures painted a positive picture due to heightened summer travel demand, foreign tourist arrivals remained below pre-COVID levels, limiting a full recovery for jet fuel demand. Recent flight data for early September, however, pointed to healthy numbers both for domestic and international flights.
Amidst these trends, India’s economic indicators remained steadfast. The S&P Global India Manufacturing PMI increased to 58.6 in August from 57.7 in July, indicating sustained growth in new business opportunities driven by positive demand trends. India’s GDP for the first quarter (April-June) of fiscal year 2024 grew by an impressive 7.8%, maintaining its status as the world’s fastest-expanding major economy. Other economic markers, including the index of industrial production and data for eight core industries, underscored the resilience of the Indian economy, despite the persistent challenges of inflation.
Overall, India’s oil demand growth forecast for 2023 has been revised downward to 239,000 b/d, reflecting a slight decrease of 3,000 b/d from previous estimates. Middle distillates, gasoil, and kerosene/jet fuel are anticipated to contribute more than 50% to this growth, with gasoline and naphtha together accounting for 30% of the increase.
Despite the revision, India’s oil demand remains robust, supported by solid economic growth, particularly in the industrial and construction sectors. While a seasonal dip is expected in Q3 (July-September) due to the monsoon, demand is projected to pick up again in Q4 (October-December) with the onset of festive seasons. India’s oil demand in 2023 is expected to be 7% higher than 2019 and approximately 11% higher in 2024.
- Published On Sep 11, 2023 at 06:19 PM IST
Join the community of 2M+ industry professionals
Subscribe to our newsletter to get latest insights & analysis.
Download ETEnergyworld App
- Get Realtime updates
- Save your favourite articles
Scan to download App
Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.