An uptick in manufacturing and construction activity coupled with growing air travel is expected to propel India’s oil demand, particularly diesel, petrol, and aviation turbine fuel (ATF), higher at 5.44 million barrels per day (mb/d) in April-June 2023.

According to OPEC’s monthly oil market report, India consumed 5.40 mb/d of oil in the first quarter of the current calendar year aided by healthy manufacturing and services activity, particularly during March 2023.

Looking forward

With anticipated healthy economic activity and ongoing air travel recovery, India’s demand for oil products is expected to remain strong in 2023, the report by the Organisation of Petroleum Exporting Countries (OPEC) said.

“In Q2 2023, oil demand is projected to rise by 0.3 mb/d year-on-year (y-o-y). The government’s proposed increase in capital spending is expected to support consumer’s purchasing power and boost the momentum of economic activity as construction and manufacturing activity accelerates,” it added.

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These factors, combined with a steady rise in airline activity, will support healthy oil demand growth.

“In 3Q23, oil demand is expected to remain solid at 0.3 mb/d, with transportation fuels, notably gasoline, transportation diesel and jet/kerosene expected to drive oil demand growth. Agricultural and construction activity is expected to add further support. However, in 3Q23, oil demand is anticipated to be somewhat lower due to the impact of the monsoon season from July to September,” the report projected.

In emerging Asia, a stronger-than-anticipated rebound in China after the reopening of its economy may be another possibility, while India could surprise to the upside, with domestic demand accelerating further.

“Looking ahead, crude imports are likely to decline from elevated levels, but remain supported by international demand for refined products. Product exports are expected to pick up, with higher diesel outflows,” OPEC’s report said.

January-March consumption

Oil demand in India saw y-o-y growth of 0.2 mb/d in March 2023, down slightly from around 0.3 mb/d y-o-y growth in February. Healthy manufacturing and services activity supported oil demand in March.

Looking at products, the “Other products” category was the main driver of oil demand in March, as the product saw y-o-y growth of 0.15 mb/d. Sales of bitumen, one of the components of the “other products” category, jumped 16.5 per cent month-on-month (m-o-m) from February, due to increased construction activity, the report said.

On the back of healthy mobility, gasoline grew y-o-y by 50,000 barrels per day (b/d). Stable manufacturing and agricultural activity supported diesel to see a y-o-y increase of 20,000 b/d. As India’s overall air passenger traffic inches closer to pre-Covid-19 levels, jet/kerosene increased y-o-y by 20,000 b/d.

However, petrochemical feedstock demand remained weak, as naphtha was yet to recover from soft feedstock demand from naphtha-fed steam crackers in the wake of poor production margins. LPG also declined by 20 tb/d.