The deadly second Covid-19 outbreak has halted India's fledgling rebound from the pandemic, with the revival likely to drag fuel demand for weeks, causing a setback for the global oil sector.
According to officials from top refiners and fuel retailers, combined consumption of diesel and petrol in April is expected to fall by up to 20% from the previous month due to new restrictions, including a week-long lockdown in the capital New Delhi. While major oil processors were still buying crude recently, there are signs that refining operations will need to be scaled back to compensate for falling demand.
According to Senthil Kumaran, the Singapore-based head of South Asia oil at industry consultant FGE “Given the grim situation, it’s likely that the lockdowns could be in place for several weeks or even a couple of months. India’s total key oil products demand will see a significant pullback.”
As the virus sweeps through the country, India has consistently broken records for infections and deaths, fueling concerns that the central government will be forced to impose another national lockout to stop the spread. Preliminary industry consumption estimates indicate a major effect on fuel demand during the first half of April, and the situation is expected to worsen.
While demand for motor fuel has been robust throughout the pandemic as citizens avoided public transportation in favor of their own vehicles and bikes to prevent contamination, officials from refiners and retailers said that new state government advisories discouraging people from leaving their homes unless emergency or vital facilities are expected to harm usage.
Nitin Goyal, who runs a filling station in New Delhi’s bustling eastern district, said fuel sales dropped 90% on Tuesday during the first day of the week-long lockdown in the city. He typically sells an average of 10,000 liters of gasoline and diesel a day from his Indian Oil Corp.-branded outlet and expects sales to recover to only about a quarter of usual volumes in the coming days.
FGE sees daily petrol demand declining by 100,000 barrels this month and 170,000 barrels a day in May, while diesel consumption is expected to decrease by 220,000 barrels and 400,000 barrels a day over the same period. Prior to the virus flare-up, motor fuel and diesel sales in March were at about 750,000 barrels and 1.75 million barrels a day, respectively, according to Bloomberg calculations based on official government data.