Petrol, Diesel Sales Pick Up From Record Lows, Full Recovery Months Away

Fitch expects the country's diesel demand to decline by 14 per cent in 2020 from a year ago, and sees a full-scale recovery in fuel demand in 2021-2022.

Petrol, Diesel Sales Pick Up From Record Lows, Full Recovery Months Away

Diesel accounts for about two-fifths of the country's overall fuel sales

New Delhi/Singapore:

Petrol and diesel sales in India jumped sharply in May in comparison to the previous month, in a recovery from historic lows after a partial easing of the lockdown imposed to curb the coronavirus pandemic, provisional sales data showed on Monday. But industry analysts expect a full-scale recovery to pre-COVID-19 consumption levels in the country to be months away as the monsoon season approaches while manufacturing activities remain low and transportation demand takes a hit in some parts of the country.

State-retailers' petrol sales in May rose by about 83 per cent from April to about 1.6 million tonnes. Sales of diesel, which accounts for about two-fifths of the country's overall fuel sales, rose by about 69 per cent in May compared with April to 4.8 million tonnes, provisional sales data from state fuel retailers showed.

However, petrol and diesel sales in May are still down by about 36 per cent and 31 per cent respectively from a year earlier, after contracting more than 50 per cent in April on a year-on-year basis.

State companies Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum own about 90 per cent of the retail fuel outlets in the country.

The sources who provided the provisional industry data asked not to be identified citing confidentiality.

Sales of liquefied petroleum gas (LPG) rose 13 per cent in May from a year ago while jet fuel declined by 85 per cent during the same period.

"April likely marked the nadir with diesel demand slumping by more than 50 per cent y-o-y (year-on-year)," said Emma Richards, senior oil & gas analyst at Fitch Solutions.

Fitch expects the country's 2020 diesel demand to decline by 14 per cent from a year ago, and sees a full-scale recovery in fuel demand in 2021-2022.

The June-September monsoon season and COVID-19 related disruptions will cap the country's oil consumption in the third quarter, Ms Richards said.

FGE Energy analyst Senthil Kumaran said the country's petrol consumption could return to pre-COVID level by October but diesel demand would recover only towards the end of the fourth quarter of this year.

"Manufacturing will be the key basis for a spur in gasoil demand but we don't see that picking up to the full level until end of this year," Mr Kumaran said.

Diesel demand will contract by 8 per cent in July-December versus the corresponding period a year ago and then grow 7.7 per cent in first quarter of 2021, he said.

FGE expects the country's overall fuel demand to grow by 3 per cent in the first quarter of 2021 from a year ago.