Analysis: India Crude Tours Expected To Increase Due To Improving Oil Demand And Growth Outlook

Strong points

IOC and Reliance push crude production rates up

Strokes set to an average of 5 mil b / d in August-December: Platts Analytics

GDP growth from April to June shows minimal impact on the economy: CRISIL

Indian refiners increasingly increase fill rates amid renewed confidence that the resumption of growth in demand for petroleum products is likely to be sustained, with some refiners already planning to increase cycles to 100 % of their capacity for the rest of the year.

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Gasoline demand has reached pre-COVID levels and diesel demand is increasingly expected to reach pre-pandemic levels soon, although the outlook for jet fuel remains modest. Analysts told S&P Global Platts that although the country is experiencing a resurgence of the coronavirus in some pockets, it is not yet deep enough to significantly reduce global demand.

“With the recovery in aggregate demand, refining and other related operational parameters have demonstrated an even more pronounced turnaround from the previous year,” said Shrikant Madhav Vaidya, president of Indian Oil Corp., the more major refiner in the country.

“While I say this, the gasoline sales volume has already exceeded the pre-COVID level, diesel is expected to reach it within the next 2-3 months, say by Diwali,” he added.

According to S&P Global Platts Analytics, Indian refinery operations in the first seven months have averaged 4.8 million b / d and are expected to reach 5 million b / d for the remaining months, as demand s ‘improves in domestic and foreign markets.

India’s oil demand is expected to increase by 185,000 b / d in the third quarter and up to 525,000 b / d in the fourth quarter, driven by a more widespread recovery in economic activity amid a widening economy. vaccination deployment, Analytics Platts added.

Improve growth prospects

India recorded 20.1% year-on-year GDP growth in the April-June quarter, according to government data released on August 31.

“The high GDP growth rate confirms that the virulent second wave of the pandemic hit the medical system more than it hit the economy,” said Dharmakirti Joshi, chief economist at CRISIL, a unit of S&P Global.

“That said, the recovery has been uneven in recent months, with agriculture and exports the main drivers, while private consumption and investment have been sluggish. The outlook for the rest of the year will depend on the severity of the downturn. the third wave and the vaccination rate. There is good news on the latter, ”he added.

Average cycles for all categories of refineries in India reached 91% in July from 90% the month before, according to the latest Petroleum Ministry survey, reflecting the highest cycles in three months. It was much higher than the 83% execution rate during the same period last year, which strongly reflects the overall improvement in economic activity.

In July, India’s demand for petroleum products increased 7.9 percent year-on-year to 16.8 million tonnes, or 4.3 million bpd, the Petroleum Ministry said. It was 3% above demand in June, according to data from the Petroleum Planning and Analysis Cell, an improvement for the second consecutive month since April, when the second wave of COVID-19 hit the country.

For the January-July period, demand for petroleum products increased 9.3% to 119.4 million tonnes, or 4.5 million b / d, over the period of the previous year. The demand for diesel and gasoline increased by 11.9% and 15.6%, respectively, during the seven-month review period, while the demand for jet fuel increased by 3%, the demand for LPG increased 2.4% and demand for naphtha increased 6.5%.

In July, state-run refineries recorded 91% runoff, compared to 86% the month a year earlier and 86% in June.

IOC recorded an average of 96% combined operation for all of its nine stand-alone refineries in July, up from 91% a year ago and 94% in June. The state-owned Bharat Petroleum Corp. Ltd. recorded an exploitation rate of 100% in July, up from 83% the same month last year and 91% in June.

Crude refining by private refiners

Private refineries recorded an average 90% operating rate in July, down from 78% the year before and 95% in June. Reliance’s domestic unit operated at 98% in July, up from 101% in the previous year period and 99% in June.

Its export-oriented refinery was operating at 76% in July, up from 49% last year and 87% in June. Reliance’s combined run was 87% in July, down from 74% a year ago and 95% in June.

Nayara Energy, owned by Rosneft, recorded an execution rate of 99% in July, up from 92% the previous month and 100% in June.

Indian refiners processed 19.38 million tonnes of crude oil in July, an average of 4.6 million barrels / day, up 9.6% year-on-year and 5.35% more than in June. Analysts said refinery tours in August could improve for the second month in a row as local demand for oil is set to increase.

During the January-July period, India’s crude imports increased 5% year-on-year to 121.3 million tonnes, or 4.3 million barrels / day.

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Felix J. Dixon