India’s Aggregate Fuel Demand Rises First Time In Seven Months

Aggregate demand for petroleum products, including auto and industiral fuels, rose for the first time in seven months, as India's economy limped out of a pandemic-induced consumption slowdown.

Consumption of petroleum and related products rose 2.5% year-on-year to 17,777 thousand metric tonnes in October, according to data from the Petroleum Planning and Analysis Cell. That’s the first increase since March.

The combined consumption of petrol, diesel, liquefied petroleum gas, naphtha and pet coke, among others, was 84.1% of last year’s level in April-October. That reflects the prolonged impact of one of the harshest lockdowns in the world to contain the pandemic.

India’s economy contracted 23.9%, the most among major economies, in April-June in the aftermath of one of the world’s strictest Covid-19 lockdowns. But the situation improved in the following quarter when the GDP declined 7.5% as the nation resumed economic activity in phases. That also aided consumption of several categories of fuels in October, including diesel that saw the first increase in demand since February.

According to the data by Petroleum Planning and Analysis Cell, here’s how demand for key fuels fared in October and why:

Petrol

As preference for personal mobility and consumer sentiment began to rise following the pandemic—reflected in month-on-month jump in sales of passenger vehicles and two-wheelers during the festive season—consumption of petrol increased by nearly 4.5% over a year earlier in October, growing for the second straight month.

Diesel

Consumption of diesel—used in buses, trucks, industry and agriculture—rose 7.4% year-on-year in the first such increase in eight months. It was aided by:

• A pick-up in farming activity and increased tractor sales.
• Opening up of highways.
• Pent-up demand for capital goods.
• Increasing industrial operations.

However, recovery in diesel consumption slipped in November, which according to ICICI Securities, stood at 5% year-on-year.

Higher demand for petrol and diesel, along with their exports exceeding production targets, have led to a fall in auto fuel inventories of oil marketers, ICICI Securities said in a report. A rise in international oil prices and retail price hikes may keep their net marketing margins high, it said, adding that there’s a likelihood of inventory gains in the third quarter.

Kerosene

Kerosene consumption, however, fell 18.5% year-on-year in October. According to the Petroleum Planning and Analysis Cell, that’s because usage fell in all union territories except Jammu & Kashmir and Ladakh, and states of Andhra Pradesh, Delhi, Haryana and Punjab were declared kerosene-free.

LPG

LPG usage rose 3.2% year-on-year in October as beneficiaries of the Ujjwala scheme, who receive cylinders of the fuel for free, sought refills. An early onset of the winter in Northern India boosted demand, according to the Petroleum Planning & Analysis Cell.

ATF

Consumption of aviation turbine fuel fell by nearly half from a year ago as air travel remained out of favour amid the pandemic. International air travel is banned, excluding certain flights engaged in special services.

Industrial Fuel

Industrial fuel consumption grew 5.2%, driven by fuel oil, naphtha and bitumen, whose usage rose 12%, 15%, and 49%, respectively, over the last year. Pet coke, used as a feedstock in cement production, declined 16%, as demand for construction material fell. Bitumen consumption grew in October as construction of road projects gained momentum.

Also Read: Higher Prices, Demand To Offset Cost Headwinds For Cement Makers

Furnace Oil And Low-Sulphur Heavy Stock

October was a mixed bag for these fuels, which are used in shipping, power, fertiliser, petrochemical, and iron and steel industries. Usage fell in power generation and fertiliser sectors, but rose in aluminum and shipping sectors.

Naphtha

Naphtha consumption grew 15.2% year-on-year in October, aided by usage in petrochemical industries, its main consumer, apart from fertiliser and power companies.