Fuel Demand In September Steady, Rising Global Prices Cloud Recovery

The country's September fuel consumption crawled higher month-on-month as economic activity continued to ramp up, government data showed on Wednesday, but soaring global oil prices could stall a recovery in the world's third-biggest oil importer and consumer.

Fuel consumption, a proxy for oil demand, totalled 15.92 million tonnes last month, up slightly from August and 5.2 per cent higher than in September 2020, data on the Petroleum Planning and Analysis Cell (PPAC) website.

But overall, consumption was still 1.7 per cent below September 2019. Monsoon rains and shipping constraints had prompted a dip in consumption in August.

Petrol sales slipped 3.5 per cent from August, but climbed six per cent year-on-year and 9.5 per cent from September 2019.

Increased personal mobility drove petrol demand, "which has clearly moved above pre-COVID levels", said Hetal Gandhi, director at CRISIL Research.

Consumption of diesel, which usual accounts for about 40 per cent of refined fuel sales, also eased 1.7 per cent month-on-month to 5.51 million tonnes, and was 5.6 per cent lower compared with September 2019.

But diesel sales rose slightly from the same period last year. "While overall diesel demand still remains below pre-COVID levels, a recovery is in line with a rush ahead of the festive season," Gandhi added.

However, soaring global crude prices could slow the rebound, with India signalling late last month that elevated global oil prices could also speed up the transition to alternative energy sources. [O/R]

"I see a gradual recovery in demand from here, but high oil prices could pose a serious problem for Indian consumers," Refinitiv analyst Ehsan Ul Haq said.

Versus a year ago, sales of liquefied petroleum gas (LPG) increased 4.5 per cent to 2.36 million tonnes, while naphtha sales fell 0.5 per cent to 1.11 million tonnes. Sales of bitumen, used for making roads, were up 7.2 per cent, while fuel oil use rose 21 per cent.

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