India’s worsening COVID outbreak is set to disturb the nearly balanced global oil market, which will show a surplus of oil supply of as much as 1.4 million barrels per day (bpd) next month amid a sizeable loss of demand from the world’s third-largest oil importer, Rystad Energy says.
India has seen fuel demand decline in recent weeks as record-high new coronavirus infections are prompting lockdowns and curfews in many states in the country of 1.3 billion residents, limiting mobility and slowing business activity.
India’s combined demand for diesel, the most used fuel in the country, and for gasoline is set to plunge by as much as 20 percent in April compared to March, officials from refiners and fuel retailers told Bloomberg. Demand is further expected to decline in the coming weeks as curfews and localized lockdowns are likely to be extended.
The enormous health crisis in a major oil importer and consumer such as India has prompted Rystad Energy to significantly revise down its short-term estimate of global oil liquids demand. India’s crisis is expected to slash 575,000 bpd of oil demand in April and as much as 915,000 bpd in May, “disturbing the almost-balanced global oil market and building a sizeable glut,” the energy research firm said.
The surplus on the global oil market is seen at 900,000 bpd this month and at 1.4 million bpd next month, according to Rystad Energy.
India’s demand decline coincides with OPEC+ starting to bring additional supply to the market as of May 1. In a shortened and fast meeting earlier this week, the alliance didn’t change its decision to start raising output, signaling confidence in oil demand recovery elsewhere despite the surging COVID cases in India.
While Rystad Energy sees a glut coming, Goldman Sachs continues to believe that the market will take India’s crisis in its stride and will realize the biggest jump ever over the next six months. Goldman Sachs continues to see oil rising to $80 per barrel this summer and says that “The magnitude of the coming change in the volume of demand -- a change which supply cannot match -- must not be understated.”
By Tsvetana Paraskova for Oilprice.com
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