Singapore — India's strong rebound in domestic gasoline consumption will likely hit a roadblock in the near term, amid fresh lockdowns in several states as the country fights a renewed battle against COVID-19.
New lockdowns have been imposed in several states across India, with the largest restriction placed on Maharashtra from April 14 until May 1, affecting approximately 125 million people in the state.
Maharashtra's capital city of Mumbai in Southwestern India has seen driving activity -- a proxy for gasoline demand -- plummet to 70% below baseline levels as of April 10, the lowest since July 2020 and sharply lower than the 40% above baseline levels that was recorded earlier in February, S&P Global Platts data showed.
On April 19, India reported 273,810 new cases of COVID-19, a record high, according to John Hopkins University data. India on April 12 had already overtook Brazil to be the second worst-hit country by the virus globally.
"The lockdown in the state [of Maharashtra] is quite serious. The state is one of the richer states, which accounts for a fair bit of driving," one Singapore-based gasoline trader said.
Meanwhile, India's capital city of New Delhi also imposed a six-day lockdown from the evening of April 19 onward as COVID-19 cases spiked, pressuring hospital infrastructure, local media reported.
Driving activity in New Delhi was recorded at 10% above baseline levels as of April 10, which although higher than the 20% below baseline levels recorded in early April, still represented an overall downtrend from February's peak of 70% above baseline levels, Apple mobility data showed.
With the curtailed driving activity in India, gasoline demand is estimated to fall to 701,000 barrels per day in April, down around 11.51% from the previous month, with hopes of recovery only gaining traction from June onwards, S&P Global Platts Analytics data showed.
"India's gasoline demand in H2 2021 to be 5.5% higher than H1 as the COVID situation improves amid widening vaccination rollout," JY Lim, oil markets adviser at Platts Analytics said.
In March, domestic gasoline consumption averaged around 792,000 b/d, the highest in more than 23-years, data from the Petroleum Planning and Analysis Cell, or PPAC, showed.
Refinery runs to stay firm
But while domestic consumption stalls, the likelihood that Indian refiners would scale back gasoline production have been met with mixed expectations.
"The difference between what happened in 2020 and now is that there is demand from the Asia and the Middle East. In addition, [refining] margins [for gasoline] is the strongest it has been in a while. There is little incentive to wind down run rates," one India-based trader said.
The FOB Singapore 92 RON gasoline crack against front-month ICE Brent crude futures, for example, has averaged $6.87/b month-to-date as of April 19, up from the $5.69/b average in March and $4.28/b average in February," Platts data showed.
Demonstrating the stronger export market for gasoline, Indian private refiner Nayara Energy was also reported to have sold 60,000 mt of 92 RON gasoline for a premium of around 40 cents/b to the MOPS 92 RON gasoline assessments for May 4-8 loading, up from the premium of around 30 cents/b to the MOPS 92 RON gasoline assessments in its earlier tender for the same volume of gasoline for April 17-21 loading, Platts previously reported.
"If anything, the state-owned refiners who supply the domestic market more would pause their ramping of run rates since there is less need to produce for the domestic market," a second trader added.
Indian Oil Corp., or IOC, the country's biggest state-owned refiner, was running its refineries at an average 96%-98% in early April, down from an average of 101% run rate in February, Platts reported earlier.
Platts Analytics also expects the pull back in crude runs as a result of the new wave of COVID-19 infections to be marginal, with total crude runs of Indian refiners keeping steady at 4.9 million b/d in April and May. During the onset of India's full lockdown in late-March 2020, Indian refiners had pulled back crude runs to 3.657 million b/d in April, a sharper 28.14% month-on-month decline, PPAC data previously showed.