India's fuel sales surged in May from a year earlier and from April to new highs, suggesting that oil demand in the world's third-largest crude importer is strengthening and could outperform expectations.
Last month, India's overall fuel sales-often seen as a proxy of demand-rose by 9% in May compared to the same month of 2022, according to government data cited by Bloomberg.
Sales of diesel-the most widely used fuel in India-jumped by 13% year-on-year, and gasoline sales surged by 11%, both registering record sales volumes.
India's fuel sales exceeded expectations in May and could have further upside considering the outperformance lately, per a note by Standard Chartered analysts Emily Ashford and Paul Horsnell quoted by Bloomberg.
India's economy accelerated to grow 6.1% in the quarter from January to March, in contrast with slowing economies elsewhere and a patchy recovery of China's economy after the re-opening.
Fuel demand in India started to accelerate early this year and jumped by 5% in March compared to a year earlier, as the world's third-largest crude oil importer continued to see consumption growing. In February, Indian fuel demand was estimated to have jumped to the highest level in at least 24 years, and refiners in India raised crude throughput by 2% in February compared to January.
In April, fuel consumption fell by 10% from March, but sales of diesel - the engine of economic growth - jumped to the highest level in government data going back to 1998.
India is one of the few bright spots for economic growth this year as markets, including the oil market, are fretting about a slowdown or even recession after the recent aggressive interest rate hikes from central banks to curb inflation.
India's oil consumption alone cannot support oil prices, which early on Friday were headed for a second consecutive week of losses despite the 1-million-bpd production cut for July announced by Saudi Arabia on Sunday.
By Tsvetana Paraskova for Oilprice.com
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Moreover, China and India will be the two principal drivers of the global oil market well into the future.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert