India's February fuel demand rises, but soaring crude may slow uptick

While India has been on a recovery path until now, high oil prices at present could lead to some demand destruction, says an analyst

India's fuel consumption rose 5.4% in February compared with the same month last year, the biggest year-on-year jump since August 2021, but soaring oil prices could slow the recovery in the world's third biggest oil importer and consumer.

Consumption of fuel, a proxy for oil demand, totalled 17.57 million tonnes for the month, data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry showed on Wednesday.

While India has been on a recovery path until now, high oil prices at present could lead to some demand destruction, said Refinitiv analyst Ehsan Ul Haq, adding supply is not going to be a problem for India since Russian barrels can be replaced by Middle Eastern crude.

"The elections are over and as a result, end consumers will be bearing the brunt of high petrol and diesel prices, which could thwart demand recovery," Ul Haq added.

Rising crude oil prices and supply disruptions following Russia's invasion of Ukraine could further sap an Indian economy already slowed by COVID-19, economists said.

State-run Indian refiner Bharat Petroleum Corp. is seeking extra oil from Middle Eastern producers for April, fearing Western sanctions against Russia could hit deliveries of Urals crude, a source familiar with the matter said.

India ships in about 85% of its oil needs.

Demand was around 0.8% higher versus the same period in 2019 before the pandemic, but nearly 3% lower than the 18.11 million tonnes in February 2020, before the country went into a lockdown due to rising COVID-19 cases.

Cooking gas or liquefied petroleum gas (LPG) sales increased 6.1% to 2.40 million tonnes, while naphtha sales fell 2.4% to 1.19 million tonnes, while sales of gasoline, or petrol, were 3.2% higher from a year earlier at 2.55 million tonnes.

Diesel was down 0.9% compared to the same period last year, yet rose 2.2% on a month-on-month basis.