World’s Third-Largest Oil Importer Sees Rebound In Demand

Demand for Oil

World’s Third Largest Oil Importer, India, and their crude oil demand have been on the mend since mid-summer. It is likely to continue along this same vein for quite a while. This is with at least one refiner planning to boost refining capacity considerably.

India, the world’s third-largest oil importer, has become a key factor in oil prices. This is because of its overwhelming dependence on imported crude. During the latest wave of Covid-19 infections in the country, oil demand suffered an expected slump. But now things are looking up.

Reuters reported last month that in July, Indian refiners increased run rates to the highest in three months. This is in response to strong fuel demand. It actually followed the relaxation of movement restrictions after the worst of the wave.

The outlook for demand remains upbeat, too. Gasoline demand in the country is expected to hit a record high during the current fiscal year. This is because of the pandemic. As in other places, people in India are shunning public transport in favor of personal vehicles. The goal is to reduce their risk of infection.

Sales of passenger vehicles in India soared by as much as 45 percent on the year in July. This is according to a Reuters report from earlier this month. The report attributed the boom to pent-up demand. Still, it must have also had something to do with the shift to personal transportation. This move is at the expense of public transportation.

The resulting surge in gasoline demand could be so strong as to require additional imports. Boosting local gasoline production was not an option. Mainly, Indian refiners were drowning in unsold diesel. They had no space for throughput increases until these inventories went down.

The diesel problem is not confined to India, by the way. Asian refiners are struggling with an inventory overhang seen at 600,000 bpd as of August, per a recent Bloomberg report. Despite lower diesel exports from China, margins for the fuel remain slim, the report said, quoting an Energy Aspects analyst, and prices remain subdued, which is “really telling of how bearish the situation is.”

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Source: Oil Price

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