Platts cuts India’s oil demand in 2021 by 28%; sees crude rise above $70

S&P Global Platts has slashed demand for oil and gas from India amid the second wave of Covid cases that have triggered lockdowns in key states for the past few weeks. For 2021, it now pegs oil demand growth at 350,000 barrels per day (bpd), down from a forecast of 485,000 bpd made in February – translating into a fall of almost 28%. Demand for town gas in India, Platts said, could fall by 25-30% in the coming months.

“Since the dramatic escalation in new cases from mid-February to the end of February, we have revised down India’s oil demand forecast by 135,000 bpd for 2021 – with an adjustment to the decline of 175,000 b/d for April, 760,000 b/d for May, 830,000 b/d for June and 360,000 b/d for July – down from a forecast of 485,000 b/d made in February said Kang WU, head of global demand and Asia analytics at S&P Global Platts.

However, once the lockdowns are lifted, Platts expects pent-up demand to be released, which will in turn act as a catalyst for economic growth and trigger a surge in demand for oil and gas in the country.

“April demand was down month-over-month, and we expect a further decline in May, but a recovery in the second half remains in sight. H2-2021 oil demand is expected to be higher by 650,000 bpd to that of the first half of 2021 (H1-2021), driven by a broader recovery in economic activity amid expanding vaccine deployments,” WU said.

Besides India, demand forecasts for 2021 have been revised down for Western Europe and Latin America due to more restrictions stemming from the second and third waves of Covid. Brent oil prices, WU said, will peak in mid-2021 at over $70 a barrel.

Globally, Platts expects global oil demand growth of 5.5 million bpd in 2021 with normalization from recent lows in demand,” WU said.

However, for 2022, Platts pegged global oil demand at 4.4 million bpd, 20% lower than 2021. The upward revisions mainly concern the United States, Europe and the China. Broadly speaking, global demand will have returned to pre-pandemic levels in 2022, although the notable depreciation exception will continue to be jet fuels.

fear of inflation

High commodity prices, including oil, analysts say are likely to fuel inflation in the future, which will hurt India. Investors fear that a surge in inflation, particularly in the United States, will force central banks to raise interest rates sooner than expected and trigger a flight of capital from emerging markets (EM), including India.

“Investors should prepare for the biggest inflation scare since the early 1980s, as pent-up demand kicks in as the U.S. economy normalizes. Still, the timing of the The severity of the fear of inflation will be determined by what happens with inflation expectations.And they have increased over the past week due to the “shocking” weakness in jobs data and the surge CPI inflation in April,” wrote Christopher Wood, global head of equity strategy at Jefferies, in his latest weekly note to investors.

The 2nd wave weighs on the global outlook

Demand in the second quarter is still about 4 million barrels per day lower than the same period in 2019, according to the IEA and OPEC (EIA projects a shortfall of about 3.4 million barrels). And a closer look at the latest outlook shows reason to remain cautious. Two of the three (IEA and EIA) have lowered their oil demand growth forecasts this year. Oil climbed above $64 a barrel on Friday, helped by a rally in stocks and a weaker dollar. But prices were still heading for a weekly decline with the spread of Covid-19 in Asia, particularly India, threatening demand. “The energy market is unsure what to make of Wall Street’s fixation on inflation and India’s slow flattening of the curve,” said Edward Moya, senior market analyst at OANDA. India is the third largest oil consumer.Agencies

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Felix J. Dixon