Oil demand recovery in India poised to weather Covid comeback

Over first 10 days of 2022, sales of gasoline and diesel which together make up more than half of India's overall petroleum consumption dipped by 2% to 3% from a year earlier

Indian oil refiner Hindustan Petroleum Corp. is cautiously optimistic that the nation’s recovery from the pandemic will remain largely intact, despite a recent spike in coronavirus cases.

Infections have surged and fewer vehicles are traversing the streets of India’s capital, but authorities have so far refrained from instituting a nationwide lockdown, opting for targeted restrictions such as closing bars. While people are avoiding unnecessary travel, there hasn’t been a substantial impact to demand, according to Hindustan Petroleum Chairman Mukesh Kumar Surana.

“There’s no doubt January will be subdued compared to December,” Surana said, predicting that the current surge in Covid-19 infections should flatten this month. “I’m not seeing a longish trend to this wave.”

India was hit hard by a devastating outbreak of the delta variant early last year that overwhelmed the health system, although the nation was spared a collapse in oil demand similar to 2020 after avoiding a nationwide lockdown. The economy recovered over the second half of 2021 as vaccinations rates rose, with diesel consumption climbing to a two-year high in December and gasoline use at the highest in records going back to 1998.

Over the first 10 days of 2022, sales of gasoline and diesel -- which together make up more than half of India’s overall petroleum consumption -- dipped by 2% to 3% from a year earlier, according to preliminary estimates by refinery officials with direct knowledge of the matter. Foot traffic through the nation’s airports has also dropped, data from the Civil Aviation Ministry show.

The overall outlook still remains bullish. India’s total oil demand is expected to grow 4% to 5% over the 12 month ending March 31 compared with a year earlier, according to Prashant Vasisht, vice president at ICRA Ltd., the local unit of Moody’s Investors Service. The current virus wave won’t have a lasting impact on demand, Vasisht said, forecasting 3% to 5% growth next year.

India’s refiners are also keeping crude purchases robust. Bharat Petroleum Corp. is seeking additional volumes from Saudi Arabia for February delivery, while top processor Indian Oil Corp. recently issued a tender seeking to buy crude from West Africa to the Americas for February and March loadings.

“February onwards, it will be normal again,” Hindustan Petroleum’s Surana said.