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Reinstated Lockdowns Threaten India’s Oil Demand Recovery

Amid record daily new COVID cases and reinstated lockdowns in populous cities, Indian refiners have started to cut oil processing rates as fuel demand in the world’s third-largest crude importer has started to slip this month. 

India is now the second-worst affected country by the coronavirus after the United States and ahead of Brazil.

India has been reporting record daily new cases in recent days. On Monday, the capital New Delhi announced a six-day lockdown as hospitals became overwhelmed with patients with severe COVID symptoms. Earlier this month, the biggest city and financial center, Mumbai, was also placed on lockdown until the end of this month, threatening the recovery of fuel demand in the country.

In response to already weakening fuel demand, Mangalore Refinery and Petrochemicals has already reduced crude oil processing rates and could shut down one of its crude units, a source with knowledge of the matter told Bloomberg on Tuesday.

State-controlled Indian Oil Corporation (IOC), the biggest refiner and fuel retailer, is currently operating at around 99 percent capacity, a company official told Argus. There is enough storage for the refined products, for now, officials say.  

However, if the lockdowns in Mumbai and New Delhi extend into May, IOC and other refiners in India may have to cut refinery runs by 10 percent next month, industry officials told Argus.

Related Video: Drivers Get Ready For Summer Gas Shock

As India continues to report more than 200,000 daily new COVID cases in the past week, evidence has started to emerge that fuel demand is already suffering as lockdowns are being imposed.

Demand for all major fuels—diesel, gasoline, jet fuel, and liquefied petroleum gas (LPG)—dropped in the first half of April compared to the same period in March, officials told PTI. The trend of declining demand is set to worsen in the second half of this month as more cities and states are on lockdown or various forms of curfews. Demand for diesel, the most used fuel in India, dropped by 3 percent in the first half of April from the first half of March, while gasoline consumption fell by 5 percent, the officials told PTI.

By Charles Kennedy for Oilprice.com

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