India's July fuel demand recovers to 3-month peak

Fuel demand in India rose in July to its highest since April as pandemic restrictions and lockdowns were unwound in most states, boosting industrial activity and mobility.

Fuel consumption, a proxy for oil demand, totalled 16.83 million tonnes, up 2.9% from June and 7.9% from the same period a year ago, data on the website of the Petroleum Planning and Analysis Cell (PPAC) showed on Monday.

Consumption had slumped in May to its lowest since August when a deadly second wave of Covid-19 prompted lockdowns in most Indian states. But most restrictions were eased in June and further in July, driving a recovery in demand.

"We're expecting consumption to be flat for one more month, then accelerate seasonally in Q4, which by our estimates should be an increase over pre-pandemic levels," Natixis commodities strategist Joel Hancock said.

Hancock, however, expects elevated domestic prices for petrol and diesel to limit the recovery.

"There will be an impact of higher prices on consumption but the broader pandemic recovery trend will outweigh this - so we'll still get growth on a y/y basis and relative to 2019."

Consumption of diesel, which accounts for about 40% of India's refined fuel sales, rose 11.5% year on year to 6.14 million tonnes but was down 1% from the previous month.

Sales of gasoline, or petrol, increased by about 16.4% to 2.63 million tonnes on an annual basis and were up 9.2% from June.

Sales of cooking gas, or liquefied petroleum gas (LPG), rose 4.6% to 2.37 million tonnes, while naphtha sales dropped by about 5.3% to 1.21 million tonnes.

Sales of bitumen, used for making roads, were up 4.1%, while fuel oil was 5.1% lower.

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