India’s oil demand to rebound in February as Covid-related restrictions ease: report

India’s oil demand is expected to pick up in February as Covid-related restrictions ease, according to a report from Platts Analytics. In January, demand for petroleum products was 2.1%, or 100,000 barrels per day (bpd), down year-on-year. Demand has been dampened by the reimposition of Covid-related restrictions.

The report says the daily infection rate in major cities has fallen sharply in recent times and states have been gradually removing restrictions. Citing the Oxford Stringency Index, which measures government responses to the Covid-19 outbreak, the report says restrictions have eased since February 1, which should boost mobility and therefore demand for transportation fuels.

“After a decline in domestic fuel demand in January, we expect the recovery to be fairly quick in February as shown by the toll transaction data released by the RBI,” he said.

He added that the “Apple Mobility Average” for early February was up 20% from the January level, while domestic flights showed signs of recovery. In addition, from midnight on February 14, all international passengers arriving in India only need to self-monitor for 14 days with no home quarantine requirement and pre-arrival RT-PCR tests have been suppressed on presentation of a valid vaccination certificate.

“We expect oil demand from India to rebound in February, up 260,000 bpd (barrels per day) on a monthly basis,” he said.

The report also observed that with national elections underway, domestic market companies have been unable to pass on high oil prices despite rising global crude prices, as retail fuel prices are a politically sensitive subject.

“We can expect retail prices to rise in line with high international prices once the polls are over, which could further fuel already high inflation and have the potential to slow the already fragile recovery in demand. In addition to releasing Strategic Petroleum Reserves (SPRs) to state refiners last year, in conjunction with other major US-led economies to cool international oil prices, India has also cut fuel taxes to mitigate the impact of high prices on consumers,” it said.

India is heavily dependent on crude imports and its strategic oil reserves are relatively low compared to other major Asian consumer countries such as China, Japan and South Korea. India’s relatively high inflation means it has less room to stimulate its economy, even though growth is expected to be strong at 8% for 2022, he said.
Source: Living Mint


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Felix J. Dixon