India’ petroleum product demand doubles in May, after sharp drop in April
With country’ petroleum product demand doubling in May, India’s largest refiner Indian Oil Corporation Ltd (IOC) on Wednesday said its refineries are operating at 83% of their capacity.
This comes in the backdrop of Indian economy slowing coming back to life after the world’s strictest lockdown. The state owned refiner had slashed its refining capacity to 39%, following a sharp drop in India’s petroleum product demand because of the coronavirus outbrea.
“The crude oil throughput of IndianOil refineries crossed 80% as on date, with consumption of all petroleum products put together almost doubling in May ’20 as compared to April ’20 levels,” IOC said in a statement.
India’s power and overall energy demand, which had nosedived, is also slowly getting to their pre-lockdown levels, Mint reported. Energy consumption, especially electricity and refinery products, is typically linked to overall demand in an economy.
“The Corporation has been able to gradually raise the throughput of its refineries from about 55% of rated capacity in the beginning of May ’20 to about 78% by the month end, and 83% as on date. Capacity utilisation of the refineries had dropped to almost 39% in the beginning of Apr.’20,” the statement added.
With the world slowly opening up for business, oil prices are up again after April’s downward spiral, when demand almost vanished in a world under lockdown. The international benchmark Brent crude was trading at $40.44 per barrel on Wednesday, and West Texas Intermediate (WTI) was at $38.06 per barrel at the time of going to press. Brent crude hit a 21-year low and US oil futures slumped to negative for the first time as the glut overwhelmed the world’s limited storage facilities, triggering a wave of selling by traders in April.
Transportation demand has come down with citizens cooped indoors, though there has been an increase in the demand for domestic cooking gas during the nationwide lockdown.
“While the consumption of all petroleum products put together almost doubled in May ’20 compared to April ’20 levels, growth of petrol was higher at about 70% and diesel at 59%. Compared to May ’19, or the early months of the current year prior to the lockdown, the growth percentage has still to catch up by 24% to 26% for all products. In the case of LPG, with the Corporation rolling out about 25 lakh cylinder refills a day, the average backlog is less than a day,” the statement said.
Mint reported on 5 June about traffic congestion, power generation, port activity, vehicle registration and other high-frequency data point to the economy perking up as India reopens, recovering from a devastating slump as factories went idle and people were ordered to stay at home amid the coronavirus pandemic.
“Along with growing consumption of white oils petrol and diesel (except ATF, which is still lagging at about 24% of normal level), the demand for black oils and specialty products like fuel oil, bitumen, petcoke and sulphur has also shown marked improvement, facilitating increase of refineries throughput,” the statement said.
The development is also important as India is a key refining hub in Asia, with an installed capacity of more than 249.36 million tonnes per annum (mtpa) through 23 refineries. Large Indian refiners include IOC, Bharat Petroleum Corp. Ltd, Hindustan Petroleum Corp. Ltd, Nayara Energy Ltd (formerly Essar Oil) and Reliance Industries Ltd.
“With Guwahati Refinery coming online after maintenance shutdown, IndianOil refineries are geared to operate at about 90% of their capacities this month, as products demand in the market increases, together with strategic product exports,” the statement said.
The cost of the Indian basket of crude, which comprises Oman, Dubai and Brent crude, averaged $56.43 and $69.88 per barrel in FY18 and FY19, respectively. It was $19.90 in April, according to data from the Petroleum Planning and Analysis Cell. The price was $40.54 a barrel on 9 June.