India’s fuel consumption saw a massive dip of 45.8%, last month, according to data released by government. All petroleum products, except LPG, saw massive demand historic lows following the nationwide lockdown that halted all “non-essential” economic activities alongside restricting movement.
Prime Minister Narendra Modi had announced a 21-day lockdown beginning March 25. Afterwards, the government, extended the lockdown until May 17, with some relaxations in lower-risk areas. However, flights are still suspended, trains aren’t plying, vehicles are still off the road and cargo movements are happening in a staggered fashion as most people in red zones are to stay home. Although, Government had allowed trucks to ply as well as farmers and industries in rural areas to resume operations after April 20.
State fuel retailers in India sold 9.929 million tonnes of refined fuel in April, down from 18.32 million tonnes of fuel, consumed in the same month a year back, according to official data released by the petroleum ministry, on Saturday. Experts are saying that in India, consumption of fuel, a proxy for oil demand, has reached the lowest since 2007.
Falling fuel demand has reduced crude processing by refiners, who are facing storage constraints at a time when lower cracks in overseas markets have made exports unattractive. The International Energy Agency (IEA) in its latest report said India’s annual fuel consumption will decline 5.6% in 2020 compared with growth of 2.4% forecast in its March report.
Consumption of diesel, which is widely used for transportation as well as for irrigation needs in India, was down about 55.6% year-over-year at 3.25 million tonnes. Moreover, sales of gasoline, or petrol, dropped by 60.6% from a year earlier to 0.97 million tonnes. Aviation turbine fuel (ATF) consumption collapsed by 91.3% to 56,000 tonnes as most airlines have stopped flying.
However, cooking gas or liquefied petroleum gas (LPG) sales rose about 12.1% to 2.13 million tonnes, while naphtha sales fell 9.5% to 0.86 million tonnes. State-retailers sold 21% more LPG in the first fortnight of April from a year earlier. India is providing free cooking gas cylinders to the poor for three months to June to help them weather the impact of the lockdown.
Even though, sales of bitumen, used for making roads, slumped 71%, fuel oil use dipped 40% in April. But, India’s fuel demand growth could return to normal levels by mid-May as the government takes steps to restart the economy and support .”Since last two week there is a gradual increase in the demand, very slow … but we are confident by middle of May we will be moving towards the normal position. That’s our calculation,” oil minister Dharmendra Pradhan told IHS Markit’s CERAWeek conversations.
Furthermore, Pradhan explained that the slump in global oil prices, together with with falling fuel demand, would lead to inventory losses for refiners. Refiners had to defer some oil cargoes due to the fall in local demand, he added.
“Our refiners are facing severe inventory loss because all of our purchases from February, March, and April, prices are not what they are today. So we have to pay the whole price. It’s a double burden. There’s a market loss and an inventory loss for our oil companies,” he said.
Indian refiners would report inventory losses of more than 250 billion rupees ($3.3 billion) in the January-March quarter after the 70% fall in oil prices, CRISIL Rating, said in a recent report.
India has announced a series of steps to help all industries facing low demand and liquidity problems as a result of this lockdown.
“More thing(s) will come up in near future and looking at all such things I am expecting a demand growth … We will not face major problems to maintain our targets that we had decided in the beginning of the financial year 2020-21,” Pradhan concluded.