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Demand for fuel in the world’s third-largest oil importer, India, is crashing amid record new daily COVID cases that lead to tightening restrictions and could slow the global oil demand recovery that the market and OPEC+ were expecting.
For the second day in a row, India reported on Friday the highest single-day increase in COVID cases anywhere in the world since the pandemic started.
The biggest cities in India are on lockdown again this month, when the surge in infections started to overwhelm hospitals. The mobility restrictions are also hurting the trucking business, which consumes a lot of fuel.
India’s combined demand for diesel, the most used fuel in the country, and for gasoline is set to plunge by as much as 20 percent this month compared to March, officials from refiners and fuel retailers told Bloomberg.
India’s demand for all major fuels—diesel, gasoline, jet fuel, and liquefied petroleum gas (LPG)—dropped in the first half of April compared to the same period in March, officials told PTI this week. Demand for diesel fell by 3 percent in the first half of April from the first half of March, while gasoline consumption declined by 5 percent, the officials told PTI.
The trend of declining demand is set to worsen in the second half of April as more cities and states are now on lockdown or various forms of curfews.
Indian refiners are said to have started to cut oil processing rates. There is enough storage for the refined products, for now, so most are not cutting rates yet, officials told Argus. However, if the lockdowns in Mumbai and New Delhi extend into May, refiners may have to cut runs by 10 percent next month, industry officials told Argus.
Industrial activities have already slowed in some states, while driving in major cities, a key contributor to India’s fuel demand, has dropped sharply, Senthil Kumaran, head of South Asia oil at industry consultant FGE, told Bloomberg.
India’s crude oil imports are holding steady in line with seasonal norms so far in April, but the COVID resurgence could temper India’s crude oil purchases in the coming weeks, Fotios Katsoulas, Liquid Bulk Principal Analyst, Maritime & Trade at IHS Markit, said on Friday.
Indian oil refiners “will need to adjust operations if the situation does not improve by the end of April,” Katsoulas added.
