India reported on Monday its highest number of new daily COVID-19 cases so far and put its largest city Mumbai on lockdown, potentially threatening fuel demand and crude oil imports in the world’s third-largest oil importer.
Resurging coronavirus cases in recent weeks have combined with high fuel prices—due to the rally in crude oil prices—to drag India’s oil demand down.
The new strict measures in India’s financial center and most populous city are now set to further impact oil consumption and potentially oil imports as refiners are unhappy with the high oil prices courtesy of the OPEC+ production cuts.
Record-high gasoline and diesel prices stalled India’s fuel demand recovery in February, with oil consumption down by 5 percent to its lowest level since September last year, government figures showed in the middle of March.
Consumption of diesel—the most used fuel in India—declined by 8.5 percent, while gasoline demand dropped by 6.5 percent, according to data from the Petroleum Ministry, cited by PTI.
In February, gasoline and diesel prices in India surged to record-high levels, but state-held refiners eventually stopped price hikes at the pump.
Over the past two weeks, fuel prices have dropped because of the lower crude prices, but the resurging virus is now posing a threat to the demand in April and going forward.
India’s oil imports are also very sensitive to the international crude oil prices, and the government has openly expressed its dissatisfaction with the OPEC+ policies since the beginning of 2021, which, India says, are “artificial cuts to keep the price going up.”
The world’s third-largest oil importer has also started to look more aggressively to diversify its sources of crude away from its largest regional supplier, the Middle East. India is also said to have asked its state refiners to review what it sees as contracts “loaded against the buyer” with Saudi Arabia, the world’s top oil exporter.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.