Oil product demand in India is picking up, and refiners are increasing refinery runs ahead of two of the country's biggest festivals, Navratri and Diwali.
Indian Oil Corp has boosted run rates from 66.7 percent in August to 86 percent, according to Bloomberg, with Bharat Petroleum operating at 85 percent of capacity and Hindustan Petroleum Corp operating at full capacity.
"Diesel recovery is inching toward normal and the festivals and harvesting seasons will boost demand further," said the former director of refineries at Bharat Petroleum Corp, as quoted by Bloomberg. "Festival season adds at least 10% to India's overall fuel demand as compared to the rainy season."
The seasonal uptick in demand for oil products comes just weeks after reduced refinery run rates forced local industry players to import gasoline. They had reduced their run rates substantially in response to the pandemic as India became the second-most affected country in the world after the United States.
While diesel demand remained lower than usual because of the decline in industrial activity, including freight transportation, gasoline demand rose as people more frequently opted for personal transport amid surging infection numbers.
Diesel consumption in India is still twice as much as gasoline. Yet the weaker economy during the national lockdown and the local lockdowns afterward, as well as the monsoon season, have created challenges for diesel demand's recovery to pre-pandemic levels. Higher taxes that have raised diesel prices have also contributed to the lower demand.
India, alongside neighbor China, has been one of the main drivers of global oil demand and, as such, is a big bearish factor for the future of this demand in the context of the pandemic. And while the immediate future appears to be bright for seasonal reasons, the long-term outlook is not so bullish. BP said a month ago in its Energy Outlook that the country's oil consumption rate could peak in just five years.
By Charles Kennedy for Oilprice.com
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