India’s oil industry struggles to predict when demand will pick up, Energy News, ET EnergyWorld


India’s energy demand takes a hard hit as Covid-19 rampages across the country. But the uncertainty surrounding when the wave of the virus will subside and the lack of a unified response from the government has left the oil industry in the dark as to how quickly consumption could pick up.

The destruction of demand over the past two months has been less severe than last year, when the government imposed the world’s largest national lockdown. However, the lack of coordinated efforts to shut down activities in order to stop the spread of the virus will likely lead to a longer, albeit less pronounced, economic recession.

“When it will return to normal is a very difficult question to answer,” said Shrikant Madhav Vaidya, president of Indian Oil Corp., the country’s largest refiner. “We can only hope and pray that with the current vaccination campaign, things are going well. But when, I don’t know.

Unlike last year, Prime Minister Narendra Modi did not impose a nationwide lockdown. States have been left to fend for themselves, which has led to a patchwork of curfews and restrictions that are constantly extended as record infections and deaths overwhelm hospitals and crematoria.

“We hope the situation will be clearer by the end of this month or the first week of June,” said Mukesh Kumar Surana, chairman of Hindustan Petroleum Corp. Demand is expected to be better from the quarter through September, he said.

Diesel and gasoline, which account for more than half of India’s oil consumption, are the most affected by localized lockdowns. Sales of both fuels at the three largest retailers are about a third lower so far in May compared to pre-virus levels two years earlier. It’s not as bad as it was in April 2020, however, when demand almost halved. This time around, more factories remained open and freight movements between states were not as badly affected.
India's oil industry struggles to predict when demand will pick upEven so, around 65% of India’s truck fleet is idle due to low demand and a shortage of drivers, according to Naveen Kumar Gupta, secretary general of the All India Motor Transport Congress. Localized restrictions create barriers to the movement of trucks and slow progress in driver vaccination and reverse labor migration to rural areas is really hurting the industry, he said.

Indian refiners hoped to keep processing rates reasonably high this year, encouraged by low inventories and low export opportunities, even as consumption declined. May’s shipments of clean fuels like gasoline and diesel are expected to be the highest since January 2020, according to oil analysis firm Vortexa.

However, a slowdown in construction and factory activity led to a build-up of sulfur and bitumen inventories, making it more difficult to maintain operations. Crude processing fell to 4.86 million barrels per day in April, from 4.96 million in March, according to official data. FGE forecasts operating rates of 4.45 million this month, 4.6 million in June, and then an average of 4.8 million in July and August.

Demand for key petroleum products – diesel, gasoline, LPG, naphtha, jet fuel and fuel oil – is expected to decline by about 730,000 barrels per day in May, from 4 million in March, the industry consultant said. June’s demand will only exceed 30,000 barrels per day compared to this month, according to FGE.

“Regional lockdowns and periodic announcements make it difficult to forecast,” said Senthil Kumaran, South Asia oil manager at FGE, who has already revised Indian fuel demand estimates down twice this year. “I am convinced that the impact will also persist in the third quarter. It will be very difficult for Indian oil consumption to reach March levels any time this year. “

– With the help of Kevin Dharmawan.

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