S&P Global Commodity Insights: India’s oil demand remains robust in March, likely to ease near term on high fuel prices before improving in H2
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* India's oil demand rises 3.7% on year in March, driven by LPG, gasoil and gasoline
* High frequency indicators such as mobility and flight statistics are showing signs of easing
* High fuel prices likely to dampen near-term demand but recovery in H2 is still expected
* India’s demand is expected to grow by 225,000 b/d in 2022, and by 185,000 b/d in 2023
* Middle distillates will account for half of the growth in 2022, partly due to a slow recovery in 2021
India's oil product demand was up 180,000 b/d, or 3.7%, year on year in March. Our forecast was spot on, though we had under-forecast the pent-up demand of transportation fuels due to hoarding by motorists in anticipation of a rise in gasoline and gasoil prices, which were offset by the weakness of naphtha and minor products. On a year-on-year basis, the demand growth was driven by gasoil, gasoline and LPG, which were up by 109,000 b/d, 47,000 b/d and 82,000 b/d, respectively. Growth was partially offset by naphtha and minor products, where were down by 68,000 b/d and 8,000 b/d, respectively. In fact, the demand for kerosene/jet fuel and fuel oil also posted positive growth, up 7,000 b/d and 11,000 b/d, respectively.
In the near term, we expect India’s oil demand to ease as retail prices are hiked, with April demand to decline by 135,000 b/d on the month but still rise on year by 375,000 b/d due to a weak base. India’s oil demand in H2 is expected to be 275,000 b/d higher than in H1, driven by a more broad-based pickup in economic activity as the country adapts to live with COVID-19 amid higher vaccination rates. More than 72% of its population has received at least one dose of the vaccine, and about 61% of its population has received both doses to be fully vaccinated. India has just started to give booster shots on April 10, and will be limited to front-line workers and those older than 60 who get them at government centers.
India’s oil demand is expected to grow by 225,000 b/d in 2022, kept unchanged from our last outlook for now, with growth easing to 185,000 b/d in 2023. 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. Middle distillates (gasoil and kerosene/jet fuel combined) will account for half of 2022 growth, partly due to a slow recovery last year. There are still risks of downward adjustments as the Russian-Ukraine conflict continues to evolve and amid growing concerns of a global or regional economic recession.
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