Oil Demand in India Rises Most Since November's Cash Clampdown

  • Diesel use rises 8 percent, gasoline demand grew 15.3 percent
  • HPCL chairman sees demand picking up further in coming months

A worker refuels a car at a gas station in Mumbai.

Photographer: DHIRAJ SINGH/Bloomberg

India’s oil demand bounced back in May, led by the highest growth in gasoline consumption in nine months and the fastest increase in diesel usage since November.

Total fuel consumption rose 5.4 percent to 17.79 million tons in May, the most in six months, according to the Oil Ministry’s Petroleum Planning and Analysis Cell. Demand for diesel, which accounts for about 40 percent of total sales, expanded 8 percent to 7.5 million tons. Gasoline offtake climbed 15 percent to 2.4 million tons, the fastest since August.

Oil consumption plunged 5.9 percent in January, the most in 13 years, after Prime Minister Narendra Modi’s shock clampdown on high-value currency notes in November. Demand fell 3.1 percent in February and 0.7 percent in March before rebounding in April.

“Fuel demand, unusually subdued in the last quarter of the fiscal due to demonetization, seems to be coming back to normal levels,” said K. Ravichandran, senior vice president and group head, corporate ratings at credit assessor ICRA Ltd. “Passenger vehicle sales continue to be good and that explains the recovery.”

The International Energy Agency, which expects India to be the fastest-growing oil consumer through 2040, trimmed the country’s demand growth estimate for 2017 by about 15 percent last month following demonetization.
“With the onset of the monsoon, we expect demand to pick up further in the coming months,” Mukesh Kumar Surana, chairman of Hindustan Petroleum Corp., said by phone. “There’s also a pickup in two-wheeler segment and that augurs well for the oil industry.”

A breakup of India’s May fuel consumption:

  • LPG demand rose 11.6 percent to 1.78 million tons
  • Petcoke use climbed 5.2 percent to 2 million tons
  • Naphtha consumption declined 1.2 percent to 1.07 million tons
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