India's oil product demand slows in March

India's demand in March for diesel fell by around 26pc, gasoline dropped by 18pc and jet fuel was down by 32pc from a year earlier, according to industry data from state-controlled companies but excluding private-sector refiners. Anecdotal data from retail outlets shows demand for transport fuel has fallen by 70pc since a 21-day nationwide lockdown from 25 March was brought in to combat the country's coronavirus outbreak.

A surge in coronavirus cases and deaths is prompting a rethink by the government, which until last week was discussing lifting the lockdown. But now the federal government and state governments want to continue the restrictions with some relaxations, which will further weigh on fuel demand.

Demand for diesel last month fell to 1.2mn b/d, gasoline use fell to 529,000 b/d and jet fuel consumption fell to 118,000 b/d, according to data for state-controlled oil companies compiled by refiner IOC. LPG sales rose by 2pc to 2.29mn t last month.

Demand this month for transport fuels is currently only a third of this time last year, an official from state-controlled refiner Bharat Petroleum (BPCL) said. IOC, BPCL and Hindustan Petroleum operate 223 of the 255 jet fuel outlets in India and 61,490 retail outlets in the country or 89pc of the total.

Diesel consumption averaged 1.79mn b/d in March 2019, with gasoline at 703,000 b/d and jet fuel at 182,000 b/d, according to data from the oil ministry that includes data from Indian private-sector refiner Reliance Industries (RIL) and Russian Rosneft-owned Nayara Energy. Provisional industry-wide fuel data from the government may be available next week.

Reduced fuel demand has forced Indian state-controlled refiners, with a combined capacity of 3.22mn b/d, to cut refinery runs to around 50pc on average. Run rates at individual refineries vary in a 30pc-65pc range. But this still exceeds current domestic demand with little storage space left to stockpile oil products. Refiners are unable to exercise force majeure on April crude purchases, forcing them to load cargoes and seek domestic storage or tankers for floating storage, or consider operating their refineries at higher runs.

RIL and Nayara are the country's largest product exporters with RIL's 704,000 b/d refinery in Jamnagar on the west coast dedicated to exports. RIL is operating its two refineries totalling 1.36mn b/d at Jamnagar at usual capacity and has not cut runs because of its focus on exports, a company official said. RIL and the 400,000 b/d Nayara also supply their combined 7,080 retail outlets in India, sell fuel in the wholesale market and in some cases supply Indian state-controlled companies.

By S Dinakar

source: Argus Media