Elections, harvesting activities to raise diesel demand, says S&P Global

Overall demand for oil products up 2.4% or 132,000 barrels per day in February

The upcoming Lok Sabha elections and rise in harvesting activities will expand the demand for gasoil (diesel) in India by 75,000 barrels per day (bpd) during April-June, S&P Global Commodity Insights said in a report on Thursday. Diesel demand had risen by 60,000 bpd in the first 3 months of 2024, the report said.

According to the report, overall demand for oil products rose by 132,000 bpd or 2.4 per cent in February, as compared to the same period last year. Demand for the product in February was also up by 256,000 bpd, with a rise in consumption of all products except fuel oil and other minor products.
 

LPG and diesel recorded the highest year-on-year (Y-o-Y) growth as household consumption remained robust due to cooler weather in northern India, while the consumption of diesel rose in line with the receding winter and increasing mobility, the report said. Fuel oil consumption was moderate as utilities and industries increased the usage of alternate sources, offsetting the impact of rising bunkering demand.

“Diesel consumption in February rose by 2.6 per cent year-on-year and 126,000 bpd month-on-month as winter fog receded and mobility picked up momentum. Further, with the normalisation of weather, industrial and construction activities saw an uptrend, leading to higher gasoil use. The truck drivers’ strike in January also led to lower demand, which improved in February, showing a higher on-month increase," said Himi Srivastava, senior analyst, South Asia Oil Markets, S&P Global.
 

Total jet fuel and kerosene demand was at 202,000 bpd in February, up 16,000 bpd Y-o-Y as air traffic strength continued after a slight drop in January due to unfavourable weather. India’s flight departures during February increased by 3.1 per cent sequentially and 4.8 per cent annually, the report said, quoting data from US-based global flight tracking and data services major AirNav Systems.

The report also raised its forecast of India's annual oil demand growth, stressing it will rise by 206,000 bpd in 2024. Diesel and petrol are set to contribute 65 per cent to this growth.
 

In its monthly oil report for March, the Organization of the Petroleum Exporting Countries (Opec) has projected India’s oil demand in the first three months of 2024 at 5.64 million bpd. Overall, India's demand of 5.67 million bpd in 2024 will be 4.2 per cent higher than the 5.34 million bpd demand seen in 2023. The global cartel of countries has pegged China's demand to rise by 3.8 per cent.

In the first quarter of 2024, S&P Global expects jet or kerosene consumption to grow by 19,000 bpd annually.