India's motor fuel demand to stay strong in Nov from holiday boost

Singapore — Demand for motor fuels in India is expected to receive a short-term boost from late-October to mid-November onwards, as the celebration of a string of national holidays will likely increase driving activity.

The major celebrations during this period include the Hindu festival of Navaratri in second-half October and the Indian festival of lights Diwali in early November, which will lead to the return of the seasonal uptick in driving activity as large numbers of people in the world's third biggest consumer of energy back on the road, industry sources said.

"India's domestic gasoline consumption has recovered very strongly. With lockdowns having mostly eased, we can expect the seasonal trend to return with the holidays," one industry source with an Indian refiner said.

In 2019, when the respective festivals were celebrated in the month of October, India's domestic consumption of gasoline jumped 7.04% month on month, data from the country's Petroleum Planning and Analysis Cell showed.

Likewise, consumption of high speed diesel oil, which is most commonly used by on-road vehicles, recorded an 11.5% month-on-month rise to reach a three-month high of 6.51 million mt in October 2019, the PPAC data showed.

In anticipation of a seasonal uptick, India's gasoline demand is expected to average around 760,000 b/d in the fourth quarter, up from the Q3 average of 700,000 b/d and slightly higher than the 2019 average of around 745,000 b/d, data from S&P Global Platts Analytics showed.

The data echoes the bullish sentiment of Dharmendra Pradhan, India's Minister of Petroleum & Natural Gas and Minister of Steel, who also foresees a strong rebound in Indian gasoline demand.

"Energy demand will be normal within the next few quarters. Things are on the right track," Pradhan said on Oct. 13 at the Energy Intelligence Forum.

Similarly, Indian Oil Corp. chairman S.M. Vaidya said at the company's annual general meeting at end-September: "The robust month-on-month recovery in diesel and petrol (gasoline) is primarily due to easing of lockdown restrictions, while petrol demand is moving upwards due to increasing preference for personal mobility."

In September, India's gasoline consumption had reached a seven-month high of 2.45 million mt, while gasoil was13.2% higher month on month to total 5.49 million mt, the PPAC data showed.

REFINERS INCHING UP RUNS

In preparation for this seasonal uptick in motor fuel demand, various Indian refiners were reportedly adjusting their operating plans.

The country's largest refiner, IOC, which has an overall operating capacity of 1.39 million b/d across nine refineries, was heard to be targeting a run rate of around 80%-85% in October, up from the 70%-75% rate it had kept to in September, industry participants said.

The country's second largest refiner, Bharat Petroleum Corp Ltd, was also reported raising run rates to slightly above 80% at end-September, Platts reported previously.

On the other hand, smaller refiners such as Hindustan Petroleum Corp. Ltd were in the spot market seeking cargoes to fill potential gaps in supply.

HPCL, to that end, emerged from a near eight-month hiatus looking to buy a total 68,000 mt of non-oxygenated 91.6 RON gasoline for delivery in November, Platts reported earlier.

"The refineries without a large network will have to manage their runs and inventories very carefully. Refining margins are not that great to warrant a long term output increase," another source with a Indian refiners told Platts.

Indian refiners could even increase their processing rate to 90% by November and 100% or more by December, should demand remain on an uptrend, Platts reported earlier.