Omicron Variation Adds Risk But Likely Won’t Derail India’s Oil Demand Recovery in 2022 | AFN News

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Omicron variant adds risk but likely won’t derail India’s recovery in oil demand in 2022

Posted on December 14, 2021

India’s oil demand down 3.8% year-on-year in November, but is expected to pick up in December

  • India’s oil demand is expected to grow by 320,000 bpd in 2022, but with downside risks from omicron and other potential variants
  • S&P Global Platts Analytics Expects India’s Net Exports of Key Products to Decline in 2022

India’s demand for petroleum products in November fell month over month as fuel consumption declined after the festival season, with trucking activity declining. The country’s demand for petroleum products in November was down 186,000 bpd year-on-year, or 3.8%, dragged down by diesel, which was down 135,000 bpd, according to the latest reports. data from the Petroleum Planning and Analysis Cell. Indeed, the demand for oil fell year on year for all other key products except keros / jet which increased by 26,000 bpd. LPG, naphtha, gasoline and fuel oil fell by 4,000 b / d, 61,000 b / d, 6,000 b / d and 3,000 b / d, respectively. Other minor products also fell by 3,000 bpd.

Falling vehicle sales and high fuel prices played a role in weakening demand for oil. Retail sales of passenger vehicles in India fell 19% year-on-year in November as the chip shortage continues to be a barrier for auto manufacturing. Fuel prices remained high even as the central government reduced excise duties on gasoline and diesel by 5 rupees ($ 0.067) and 10 rupees per liter, respectively, on November 4, the eve of Diwali. . This was followed by most of the states which reduced the state-imposed value added tax in different proportions, making gasoline and diesel even cheaper. Rajasthan and Delhi have also followed suit to reduce VAT on gasoline and diesel. But some states, including Maharashtra, Tamil Nadu, West Bengal, Telangana, and Andhra Pradesh, still haven’t cut VAT on gasoline and diesel.

The Indian economy performed well in November, collecting the GST at $ 1.3 trillion, up 2% month-on-month and the second highest figure since the introduction of the GST. Indeed, growth in manufacturing activities continued to accelerate, with its PMI remaining in expansionary territory for the fifth consecutive month and standing at 57.6 in November, the highest since January. In addition, the average daily number of motorway toll transactions, an indicator of motorway traffic, rose month by month in November, despite a slight drop in trucking activity due to Diwali, with an upward trend at the start. December.

India’s mobility index rose to 226% from pre-COVID levels in early December, from 217% in November. According to AirNav Radar Box, India’s domestic flights were flat in early December, down 8% from pre-crisis standards and improving from less than 9% in November. International travel fell 39% in early December, up 4% from November. India has decided not to completely close its borders. He made the RT-PCR test mandatory before and after arrival with seven days of mandatory home quarantine with countries “at risk”, which include among others Europe and South Africa. Some states have also introduced additional restrictions for international travelers, but there are no severe restrictions for domestic travel.

Overall, Platts Analytics expects India’s oil demand in December to grow 185,000 bpd year-on-year, bringing annual growth to 260,000 bpd (5.6%) , before posting growth of 320,000 bpd (6.7%) in 2022., as its economy continues to rebound, with a risk of downward adjustment due to the emergence of the omicron and other potential variations.

The omicron variant has started to spread in India, as more than 20 cases have already been reported and many clusters are under investigation, which could further lead to an increase in the number. Authorities have confirmed that there have been no omicron-induced deaths so far. India had administered 1.305 billion doses of the COVID-19 vaccine as of December 9. About 58% of its population received at least one dose of the vaccine, and nearly 36% of its population received both doses to be fully immunized. Over the past 30 days, the daily vaccination rate in India averaged 7.03 million doses. The central government has set itself an ambitious goal of vaccinating 100% of its vaccine-eligible population with at least the first dose by December 31 as part of the “Har Ghar Dastak” program, which means a distribution campaign door-to-door vaccines.

The impact of omicron, if it spreads wildly, will most likely be felt in the first half of 2022, as state governments tighten measures to contain the spread of the new variant. However, any foreclosure is likely to be localized and more targeted, and the impact on demand will likely be more modest than before.

In response to improving demand, India crude tours in October hit a seven-month high of 5 million b / d, up 617,000 b / d for the year. We expect India’s refinery cycles to average 5.2 million bpd in November and December. Currently, we expect India’s refinery cycles to increase by 370,000 b / d in 2022 due to stronger domestic demand, as economic activity picks up and demand for export will increase. Obviously, with the emergence of the new omicron variant, there is a risk of a downward adjustment in our outlook should oil demand weaken. Overall, India’s net exports of the three key commodities, gasoline, kerosene / jet and diesel, are expected to average 965,000 b / d in 2021, compared to 910,000 b / d in 2020, but will likely be less than 890,000 bpd. in 2022, as domestic demand continues to grow.

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Felix J. Dixon