India’s oil demand on the mend after plunging by nearly half

By Debjit Chakraborty and Dhwani Pandya
Fuel consumption in India is showing signs of rebounding after witnessing the worst monthly sales in more than 12 years.

Demand in May will be as much as 25% higher than April as planting season begins, requiring tractors and water pumps to burn more diesel, and the easing of the world’s biggest lockdown brings more trucks back to the road, according to officials at two state-owned refineries. Demand for jet fuel should benefit as India is considering resumption of some domestic flights from May 18, or even earlier.

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The world’s third-biggest oil importer saw demand crater after the government ordered its 1.3 billion people to stay home from March 25 to curb the spread of coronavirus. April consumption fell by half from the previous year to the lowest level since 2007, according to official data released Monday.

“In about a week, we will see more signs of demand revival as factories restart, construction work resumes and there’s greater freight movement,” said R. Ramachandran, Bharat Petroleum Corp.’s director of refineries. “Sowing of summer crops in north India will increase use of tractors and water-pumps helping diesel consumption.”

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Indian Oil Corp., the nation’s biggest refiner, has started boosting run rates with signs of a pickup in demand and plans to operate its refineries at 80% of capacity by end of May. The company is seeking a cargo of 2 million barrels of crude for June delivery, an unusually prompt request.

Gasoline demand should improve slightly as lockdown restrictions are eased and passenger movement picks up as factories open, said M. Venkatesh, managing director at Mangalore Refinery and Petrochemicals Ltd.

Jet fuel demand, which plunged by more than 90% as almost all flights were suspended during the lockdown has been a problem as there are limits to how much of it can be blended into diesel, Venkatesh said. A decision to resume some flights may come as soon as Monday.

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India’s rebound remains far behind that of its neighbor China, where traffic in top cities is busier than pre-virus levels. Indian demand will remain well below normal levels even with the rebound, Ramachandran said. Indian refiners have had to seek out tankers to hold oil at sea as every bit of the nation’s onshore storage capacity is filled.

India has extended its lockdown to May 17, but introduced relaxations earlier this month especially for the areas that have been least affected. Those tend to be in the countryside, while the typical urban demand centers of Delhi, Mumbai, Kolkata and Chennai still face harsh restrictions.

“A few weeks back we decided to start our economic activities – the transportation activities, the industrial activities in the rural areas of the countryside of India,” Oil Minister Dharmendra Pradhan said in an online conversation with consultancy IHS Markit. “And gradually we are edging out from the lockdown. Our demand is picking up.”