IGI Logo

India's February oil product demand was up 98,000 b/d or 2% year on year, driven higher by LPG, gasoline and other minor products, which were up 55,000 b/d, 26,000 b/d and 42,000 b/d, respectively. The latter was helped by asphalt, which saw demand rise by 32,000 b/d over the same period. Demand was supported by the easing of COVID-related restrictions, coupled with pent-up demand from activity during the elections, with the month-on-month increase nearly 10%. In fact, demand for all other products such as naphtha, kerosene/jet fuel, gasoil and fuel oil posted positive growth on the month though declined slightly on the year.

India’s highway toll transaction and trucking demand were back on track in February after a slump in January. India’s economy fared well in February with GST collection at Rupees 1.33 trillion, up 17.7% on the year. India’s March PMIs for both manufacturing and services stayed above the 50-threshold level, pointing to expansion in the sectors. However, a soaring consumer price index continues to be a cause of concern for the economy, with January 2022 inflation rising to a high of 6%. India’s relatively high inflation means that it has less leeway to boost its economy, though growth is still expected to be strong at 7.3% for 2022. Gasoil demand is set to improve as manufacturing activity regains momentum and jet fuel use will also improve as international flights start to resume, though they are likely to remain well-below capacity.

In the near term, we expect India’s oil demand to remain robust in the first half of March, but it is likely to ease in the second half as retail prices are hiked, with March demand to decline by 50,000 b/d on the month but still rise by 180,000 b/d on the year. Further ahead, India’s oil demand in H2 2022 is expected to be 275,000 b/d higher than in H1, driven by a more broad-based pickup in economic activity amid an improving COVID situation and widening vaccination rollouts. Overall, India’s oil demand is expected to grow by 225,000 b/d in 2022, revised down by 35,000 b/d from February’s outlook due to the impact of high fuel prices, with growth easing to 185,000 b/d in 2023. But there are still risks of downward adjustments as the Russian-Ukraine conflict continues to evolve and the worry of a global or regional economic recession has been growing

Above views are of the author and not of the website kindly read disclaimer